South Africa in Economic Recession

June 9

The major news this week was obviously the entry into technical recession of South Africa. This was anticipated since growth already contracted last quarter.

Moody’s reduced South Africa’s foreign and local-currency ratings one notch to Baa3 and kept the outlook at negative. Weakening institutions, lower growth prospects and their potential negative results are the reasons for the change in outlook. Moody’s also highlighted the current political tensions as an impediment to much needed investments and reforms.

The company also mentioned the uncertainty around previously approved reforms. Moody’s decision came after South Africa entered recession for the first time in eight years as manufacturing and trade sectors saw severe decline, with GDP contracting 0.7% in Q1 2017. The JSE lost 1.27%.

The Markit Stanbic Bank Uganda Purchasing Managers’ Index (PMI) reached 50.0 from 53.5 in April as export orders had weakened in May on the back of lower demand from key markets. It seems that greater political risks in trading partners like South Sudan, eastern Democratic Republic of Congo and Burundi have made transport links to those markets difficult and disrupted the flow of trade. The USErose by 0.20%.

A magistrate has announced that Zambia’s opposition leader Hakainde Hichilema will go on trial at a high court on treason charges. The LuSE increased by 2.26%.

According to a spokeswoman, Shell lifted force majeure on exports of Nigeria’s Forcados crude oil bringing all of Nigeria oil exports fully online for the first time in 16 months. Forcados exports 200,000-240,000 barrels per day and its resumption will bring Nigeria to around the 1.8 million barrels per day. This corresponds to the level the government wanted to achieve before joining OPEC output cuts. The NGSE increased by 6.07%.

The EGX30 increased by 1.61% to the level of 13,683.66 points, the highest level ever.











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