Sunshine days could take a while

While the decline in the gross domestic product (GDP) has eased from a rate of -6.4% in the first quarter to -3% in the second, it’s not necessarily a promise that sunshine days are just round the corner, according to Danelee van Dyk, economics researcher at the Standard Bank. Following the contraction of the economy by -1.8% in the last quarter of 2008, the GDP has slipped for three consecutive quarters, the first time that has happened in more than a decade. And, although the global decline may certainly be on the wane, and “seemingly losing its verve”, Van Dyk refrained from arrant optimism. “This by no means suggests that the vicious circle is unravelling, although its ferocity may very well be,” she told FTW. “In our opinion the domestic recession is reaching an advanced phase, albeit lagging the global cycle.” SA's new finance minister, Pravin Gordhan, agreed. “Just as the impact of the recession on SA lagged somewhat behind the rest of the world's, it seems our recovery will lag too.” This has been true for the continent as a whole. As the global crunch first hit the headlines, Africa – and its economic powerhouse, SA – at first seemed isolated from the market and banking turmoil that had engulfed Europe and the US. But the drop in consumer demand in the West eventually meant Africans were selling less of the commodities on which many of their economies depend. So, although delayed, the crunch came, and recent reports on the continent's economic prospects predict that overall growth for 2009 will be 2.8%, less than half the 5.7% expected before the global downturn. “The prospects for rejuvenation in depleted inventory levels – a catalyst for a rebound in production – have ripened, which should bolster the economy’s growth potential in the second half of the year,” says Van Dyk.