The South African economy entered anew a contraction in Q3 (-0.6% q/q annualized growth rate). This is not a recession per se, as Q2 growth was positive after Q1 was negative. South Africa is experiencing short-lived boom bust cycles, a pattern that we expect to continue. The power issue is the main trigger of this profile since the output capacity constraint is increasingly binding and played again on the downside in Q3 (after an already very negative figure in Q1). Along with lower access to power, energy-intensive sectors (mining, manufacturing, construction, transport) went again into contraction. As a result, GDP growth should remain very low for long, since a solution to the overall power issue has not been found yet (financing needs has been the key topic to be addressed, but not output capacity). We expect +0.5% GDP growth in 2019 and 0% in 2020. This also entails that the fiscal deficit is likely to widen to -7% of GDP and public debt to rise to 64% of GDP in 2020.
