Business confidence in South Africa fell further in the second quarter, to a level last since in 2009 when the country battled recession. According to a survey, Wednesday, persistently weak business activity and concerns over politics weighed in on the economy forcing the Rand Merchant Bank (RMB) business confidence index to fall to 29 points in the second quarter from 40 points in the first quarter.
South Africa sank into recession in the first quarter, following weakness in consumer sectors such as accommodation, wholesale and retail.
The results of the latest survey compiled by the Bureau for Economic Research suggest seven out of every 10 respondents are pessimistic about prevailing business conditions.
“In fact, given the severe strain many industry respondents (and consumers for that matter) are under, a contraction in GDP for the year as a whole is not inconceivable,” RMB said in a statement.
Sadly, “given sovereign credit rating pressures, providing fiscal stimulus is not an option”.
“And while it is not impossible for the Reserve Bank to lower rates, a deep-cutting cycle is most unlikely given the rand’s vulnerability to various global as well as domestic risks,” RMB added.
S&P Global Ratings and Fitch recently 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.