Finance Minister Nhlanhla Nene says he is due to present economic structural reforms and a stimulus package that he believes will pull the economy out of a technical recession.
His announcement came after it emerged that the South African economy had slipped into its first technical recession in nine years following Stats SA’s announcement on Tuesday that the country’s gross domestic product had shrunk by 0.7% in the second quarter of 2018. The GDP drop followed a revised fall of 2.6% in the first quarter of this year.
“We are in recession. We reported a contraction in the first quarter even with revisions and now in the second quarter with a fall of 0.7%‚ we are in recession‚” statistician-general Risenga Maluleke said in Pretoria on Tuesday.
This is despite expectations from many economists that SA would narrowly miss a recession. The Bloomberg consensus was for 0.6% growth.
A recession is defined as two consecutive quarters of declining gross domestic product (GDP) and points to a prolonged slowdown in economic activity‚ which stunts job creation and damps investment.
Nene said while government was disappointed by the latest economic figures‚ he was confident the economic structural reforms and measures to stimulate the economy he was due to table in parliament in October would help pull South Africa out of the woods.
Nene is due to present the medium term budget policy statement (MTBPS) next month‚ which outlines government’s economic blueprint and spending plans for the next three years.
Nene also conceded that this year’s increase of VAT had taken money out of the pockets of citizens‚ with a decline in household consumption cited as one of the reasons for the contraction in GDP.
Speaking from Beijing in China‚ where he is attending the Forum on China-Africa Co-operation with President Cyril Ramaphosa‚ Nene said it was understandable for there to be a panic in the country, but insisted government had a plan to be unveiled at the MTBPS next month.
“We understand the impatience of South Africans because we want things delivered as of yesterday‚” said Nene.
“The real reform package that comes out of the cabinet process is in the pipeline. There are formal processes under way‚ some of them culminating in the upcoming investment conference that the president is going to be holding in October‚ but also the MTBPS‚ because some of these are actually policy issues, so I would imagine that by the time we go to the MTBPS‚ we should have concluded on them.”
Democratic Alliance leader Mmusi Maimane said he would write to National Assembly speaker Baleka Mbete requesting an urgent debate on how to get the country’s economy “up and running again”.
“We cannot continue down the same path any longer‚” Maimane said. – Additional reporting by Natasha Marrian
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