A year ago, we wrote about South African traveling the road to recession with Nigeria. Today, the two Africa’s largest economies are now in recession.
South Africa’s economy contracted by 0.7 percent in the first quarter of 2017 after it shrunk by 0.3 percent in the fourth quarter of last year, showing that Africa’s most advanced economy is now in recession.
The country escaped recession last year after a Q1 contraction was followed by improved performance in the mining, manufacturing and finance sectors. However, several analysts have remained wary of the country’s economic future due to Jacob Zuma’s self-inflicted political crisis. The president’s controversial cabinet reshuffle in March which seemed like a desperate way to remove then Finance Minister Pravin Gordhan led to downgrades to “junk” status by S&P Global Ratings and Fitch. Gordhan had in 2016 saved the South African economy from the shocks of the appointed of an unknown man as minister after widely-respected Nhlanhla Nene was sacked.
Last week, S&P Global Ratings and Fitch said risks to South Africa’s ratings include weak economic growth and political uncertainty. Moody’s — whose Baa2 rating is two notches above “junk” — is reviewing South Africa for a possible downgrade.
South Africa joins Nigeria in the battle against recession as both countries — Africa’s largest economies — prepare for the 2019 elections. The Nigerian economy slid into recession last year, although analysts say the oil-rich country will be out of recession by the third quarter of 2017.