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South Africa slipping into recession but Brazil heading out
By Kingsley Obiejesi
South Africa’s unemployment has risen to its highest in 14 years, with agriculture and informal sectors shedding jobs and more people refraining from job hunting in the first quarter — a sign that the country’s economy may be headed for recession.
According to Reuters, the unemployment rate rose to 27.7 percent of the labour force in the first quarter — the highest since September 2003 — from 26.5 percent in the last quarter of 2016.
South Africa’s crisis coincides with a period of economic regeneration in Brazil, which, since 2013, has been in its worst known economic recession.
Data released on Thursday showed the economy to have emerged from its worst recession on record with its fastest growth rate in nearly four years.
The South American country’s gross domestic product (GDP) grew 1.0 percent in the first quarter from the preceding one, matching economists’ forecasts for the biggest rise since the second quarter of 2013.
“The recession is over!” President Michel Temer, who has resisted protests for his resignation after being placed under investigation by the Supreme Court, tweeted minutes after the release.
“It’s the result of the measures we are taking. Brazil is growing again and will grow even more with the reforms.”
Despite the progress, 14 million workers remain unemployed in Brazil, a country with one of the biggest gaps between the wealthy and poor. Many analysts expect Latin America’s largest economy, operating now at 2010 levels and forecast to grow just 0.5 percent in 2017, will continue running below potential throughout next year at least.
“There is still some way to go before a full recovery but we’re in the right direction,” Finance Minister Henrique Meirelles said in a statement praising a “historical day” for Brazil.
Brazil’s economy shrank more than 3 percent in each of the past two years, the deepest and longest downturn since records began in 1901.
It is a downturn like this that is now being feared in South Africa, where unemployment levels have risen to 36.4 percent, or 9.3 million people out of a total workforce of 22.4 million.
Statistics South Africa warned that recent credit downgrades to sub-investment grade and the threat of further cuts were taking its toll on the economy as the currency depreciated and made imports more expensive.
“Certainly you are better off without a downgrade than you are with one,” Pali Lehohla, statistician general, said. “The depreciation of the currency works for you when it is deliberate.”
South Africa’s economy shrank 0.3 percent in the last quarter of 2016 and if it shows a contraction when domestic product results are released on Tuesday, then the continent’s most industrialised economy will be in technical recession.