South Africa’s restrictions to curb the spread of the coronavirus put the economy into its longest recession in 28 years, with gross domestic product contracting more than expected in the second quarter.
GDP shrank an annualised 51 per cent in the three months through June from the previous quarter, compared with a revised 1.8 per cent contraction in the first three months, Statistics South Africa said on Tuesday in the capital, Pretoria. That’s the steepest decline since at least 1990 and extended the recession into a fourth quarter, the longest period of consecutive quarterly contractions since 1992.
The median estimate of 17 economists in a Bloomberg survey was for a 47.2 per cent drop in output from the previous quarter. Year-on-year, the economy contracted 17.1 per cent, more than the median estimate of 16 per cent.
A strict nationwide lockdown that started on March 27 deepened the slump in an economy that’s stuck in its longest downward cycle since at least the Second World War. Enforced by the police and military, people were only allowed to leave their homes to buy food, collect welfare grants and seek medical care unless they provided essential services. While a gradual reopening of the economy started on May 1, many companies closed down permanently or fired workers during the shutdown.
Output shrank more than the central bank’s estimate of a 40.1 per cent annualised contraction, increasing the chances of a sixth interest-rate cut this year. Governor Lesetja Kganyago said last month that muted inflation gives the monetary policy committee room to respond if the nature of the shock caused by the pandemic turns out to be worse than forecast.
“It adds to the case to cut by 25 basis points,” said Nazmeera Moola, head of South African investments at asset manager Ninety One in Cape Town. “We expect 25 either now or the following meeting, but I think this data helps to increase the case for a cut next week.”
The continued contraction is likely to weigh on revenue collection and the government’s efforts to stabilize debt and narrow the budget deficit. It will also make it more difficult to lower the unemployment rate of 30.1 per cent that is seen as one of the biggest obstacles to reducing poverty in one of the world’s most unequal nations.
While the Reserve Bank forecasts a rebound with annualised growth of 17.5 per cent in the third quarter, continued power cuts in what’s already a record year of outages and slow reforms could threaten the recovery.
“The level of economic activity is only likely to return to pre-Covid-19 levels by 2023-24,” said Sanisha Packirisamy, an economist at Momentum Investments. The difference between actual and potential growth “will likely keep a lid on inflation in the near term”.
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The Vile
Starring: Bdoor Mohammad, Jasem Alkharraz, Iman Tarik, Sarah Taibah
Director: Majid Al Ansari
Rating: 4/5
Who has lived at The Bishops Avenue?
- George Sainsbury of the supermarket dynasty, sugar magnate William Park Lyle and actress Dame Gracie Fields were residents in the 1930s when the street was only known as ‘Millionaires’ Row’.
- Then came the international super rich, including the last king of Greece, Constantine II, the Sultan of Brunei and Indian steel magnate Lakshmi Mittal who was at one point ranked the third richest person in the world.
- Turkish tycoon Halis Torprak sold his mansion for £50m in 2008 after spending just two days there. The House of Saud sold 10 properties on the road in 2013 for almost £80m.
- Other residents have included Iraqi businessman Nemir Kirdar, singer Ariana Grande, holiday camp impresario Sir Billy Butlin, businessman Asil Nadir, Paul McCartney’s former wife Heather Mills.
Hunting park to luxury living
- Land was originally the Bishop of London's hunting park, hence the name
- The road was laid out in the mid 19th Century, meandering through woodland and farmland
- Its earliest houses at the turn of the 20th Century were substantial detached properties with extensive grounds
Film: Raid
Dir: Rajkumar Gupta
Starring: Ajay Devgn, Ileana D'cruz and Saurabh Shukla
Verdict: Three stars
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
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Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
UAE tour of Zimbabwe
All matches in Bulawayo
Friday, Sept 26 – UAE won by 36 runs
Sunday, Sept 28 – Second ODI
Tuesday, Sept 30 – Third ODI
Thursday, Oct 2 – Fourth ODI
Sunday, Oct 5 – First T20I
Monday, Oct 6 – Second T20I