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Cape Town - Despite South Africa entering into a technical recession, National Treasury maintains there are ways to boost the country's economic growth outlook.
South African GDP data released by StatsSA on Tuesday came in at a disappointing -0.7% quarter-on-quarter, missing most analyst estimates. This second consecutive contraction in quarterly GDP data means that by definition, we are now in a technical recession.
READ: SA enters recession as GDP contracts for a consecutive quarter
"For an economy that desperately needs economic growth, this is not a good sign especially for job creation," said Purple Group trading specialist Musa Makoni.
Treasury said in a statement the worse-than-expected GDP outcome introduces significant downward bias to the GDP growth estimates communicated in the 2017 Budget Review, which projected 2017 GDP growth at 1.3%.
However, it added that despite the GDP contraction, there are green shoots that South Africa can leverage on. Treasury said these include improving global growth, stabilising commodity prices, more favourable climate conditions, reliable electricity supply and less volatile labour relations.
READ: SA economy to slow down even more - World Bank data
"The current growth rate, if sustained, will lead to a further decline in GDP per capita and revenue, risking the sustainability of our fiscal framework and more importantly undermining the delivery of social services," cautioned Treasury.
It said that Finance Minister Malusi Gigaba will be seeking a meeting with business leaders soon to discuss ways of working together to achieve inclusive economic growth.
"The current state of the economy puts more pressure on us as government, business, labour and broader society to intensify our growth programme and improve confidence as a matter of urgency to arrest the decline and set the economy on a higher growth trajectory."
READ: Rand, JSE take a knock as SA plunges into recession
Although the markets closed lower on Tuesday on the back of the poor GDP figures, independent economist Dawie Roodt said there is unlikely to be an immediate backlash because the markets have to an extent already factored in the bad news.
“The reality is that the South African economy has for a long time performed well below what is necessary to provide sufficient growth to provide employment for the rapidly growing workforce, and to provide jobs for the millions of unemployed people who want to work.”
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