By Bekithemba Ndebele
The South African economy escaped a downgrade from the world credit rating agencies. South Africa rating status was left unchanged at triple B negative status, which is a big relief for the country as it avoided downgrade to junk status.
The rating status means that the country’s investment grade was left at a stable outlook.
The Statistics South Africa (Stats SA) has however on 08 June 2016, released the Gross Domestic Product (GDP) figures. The statistics narrated that the weak rand, devastating drought, and decline in commodity prices had tremendous effect to the negative impact on the country’s economy.
According to Stats SA report, a sharp contraction in mining tipped economic growth into negative territory in the first quarter of 2016. South Africa’s economy shrank by 1, 2% quarter-on-quarter. The growth for the same grace period on year-on-year was -0, 2%.
The economy has been faced with challenges and recession. The transport entity of the economic growth has joined the agriculture as it also hit by recession.
Stats SA reported that, the mining industry contributed the most to the 1, 2% quarter-on-quarter fall.
It further elaborated that, lower production in the mining of ‘other’ metals ores, largely platinum group metals and iron ores, saw the industry contract by 18, 1%.
Hence, for the first time, Stats SA has introduced the Expenditure on Gross Domestic Product (GDPe). It measured the demand side of the economy. The amount of money used to buy the goods and services that are produced. The GDPe is reported to have fall by 0, 7% quarter-on-quarter, joining the Gross Domestic Product production (GDPp) growth in negative territory.
South Africa government is expected to work as much harder as than before for these upcoming 6 months to avoid downgrade from the world rating agencies, who are expected to return for another review after 6 months.