South Africa looks set for a second consecutive quarter of negative growth, central bank Governor Tito Mboweni said on Tuesday, tipping the continent's biggest economy into recession. But he added there appeared to be a tentative change in the investor mood towards the country, with portfolio inflows having turned positive this year, while the worst of the global downturn may be past.
South Africa's economy contracted 1.8 percent in the fourth quarter of 2008, with the manufacturing and mining sectors hit hard by a global downturn. Data in the first three months of the year show further strain - manufacturing output declined 11.7 percent and 15.1 percent in March and February respectively, and retail sales also shrunk - pointing to the first recession since 1992.
"Current indications are that the negative trends might have continued in the first quarter of this year," Mboweni said at a conference of the Road Freight Association in Vanderbijl Park, about 100 km south of Johannesburg. "The high frequency data indicates that the manufacturing sector, in particular, remains under pressure." Statistics South Africa releases Q1 economic growth data next week, two days ahead of the central bank's policy meeting to discuss interest rate changes.
A poor number - a second quarter of decline will signal a technical recession - will back the case for another big cut in the repo rate, despite inflation remaining outside the 3 to 6 percent target band. But Mboweni said it was not all "doom and gloom".
There were signs that global measures to lift growth may be working, while foreigners had turned net investors in South Africa. "There has been a tentative change in the mood to South Africa," he said. Governments around the world have slashed interest rates and boosted spending to try to kick-start growth. South Africa's government and its utilities plan infrastructure spending of 787 billion over the next three years.