South African Economy 'To Continue Growing'

The South African economy could grow only 0.8% in the third quarter and by 1.7% in the fourth quarter, implying that the country is not likely to enter into recession, Nomura International economic analyst Peter Attard Montalto predicts.

The country’s gross domestic product (GDP) growth faltered to 1.3% in the second quarter from 4.5% in the first quarter.

Nomura kept its forecast for 2011 GDP growth unchanged at 3.1%, but revised slightly downwards its 2012 growth forecast, from 3.5% to 3.4%.

“Risks to this year are strongly skewed to the downside, however, especially if recent weak manufacturing numbers become a trend lower and we have negative growth in the third quarter,” Attard Montalto said.

South Africa’s economic growth was in a “precarious” position and entering “a more difficult” second half, Attard Montalto suggested, adding that the situation “could well be aided by rate cuts”.

“Rate cuts would help these areas dampened by sentiment cuts, such as durable goods consumption,” he said.

Attard Montalto said their main concern going forward was that with such heightened uncertainty in second half of the year and potentially and even worse labour market dynamic, durable goods consumption would contract, while services would stagnate further.

Current spending by the government, which was low in the second quarter, was expected to become more supportive in future.