South Africa’s Q2 GDP growth punches way below expectations in worrying sign for emerging markets

August 25, 2015

South Africa’s second quarter growth undershot economists’ expectations in spectacular fashion on Tuesday, a clear signal emerging markets face torrid times.

The economy contracted 1.3 percent in the second quarter – far worse than any of the 21 economists polled by Reuters had predicted.

Indeed, the median forecast was for 0.5 percent growth. While economists tend to overestimate South African GDP data, they haven’t got it so wrong in many years.


Peter Worthington of Barclays Africa explained: “We have a good handle on the mining and manufacturing sectors from the monthly data, and a moderate handle on the trade sector and very little knowledge of the other sectors.”

“I think no one had any idea that agriculture would again contract so heavily in Q2, dragging sharply on growth.”

This was the first quarter-on-quarter decline in Africa’s most advanced economy since the first three months of 2014, and the actual result completely wiped out the first three month’s performance.

“The worry about this Q2 data is that the shock has not even really arrived at all yet in terms of the China commodity terms of trade,” said Peter Attard Montalto, an emerging market economist at Nomura International.

“That is going to be much of the story towards the end of the year into next year – there is much more of the shock still to come,” he added.

With China demanding fewer commodities, Brazil and other emerging market countries that rely on exported raw materials are in the same precarious position of having to hike interest rates to protect their currenciesĀ from volatility and further all-time lows.

Reporting by Vuyani Ndaba and Khushboo Mittal

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