It was to be rather feared than expected, but watching clowns.com pretending to play “Government” had to prompt the bitter reality sooner or later. Well, “sooner” is now and South Africa is officially in a RECESSION!
After starting the week on the back foot, the rand continued to fall in early trade on Tuesday following the announcement by Stats SA that the country was in a technical recession. The local currency, which lost 1.5% against the dollar at the start of the week, fell below R15/$. At 10:15, it was changing hands at R15.06 to the greenback, down 1.3% on the day. It has fallen by over 2.5% against the dollar this week alone. At 11:30, Stats SA announced that the country’s real gross domestic product had contracted by 0.7% in the second quarter of the year. South Africa has now entered a technical recession, after GDP contracted by 2.2% in the first quarter.
The local currency fell to a new daily low of R15.23/$ at 11:42 after the disappointing economic data was released. Bianca Botes of Peregrine Treasury Solutions said in an earlier morning note the rand was still being battered by emerging market weakness. “As contagion fear spreads in emerging markets, hitting the Turkish lira and the Argentinian peso the hardest in overnight trade, the narrative remains unchanged,” she said.
According to Bloomberg, pressure on the rand could get worse as traders fret about a push for land reform that may have far-reaching economic consequences.