(Bloomberg) -- South Africa's economy exited its second recession in almost a decade in the three months ended June 30 after agricultural output surged.
Gross domestic product increased an annualized 2.5 percent in the second quarter compared with a revised decline of 0.6 percent in the previous three months, the statistics office said in a report released on Tuesday in the capital, Pretoria. The median of 21 estimates compiled by Bloomberg was for growth of 2.3 percent. The economy expanded 1.1 percent from a year earlier.
Slack demand for the country's exports and domestic political turmoil have weighed on Africa's most-industrialized economy. S&P Global Ratings and Fitch Ratings Ltd. cut the nation's international debt to junk in April after President Jacob Zuma fired Pravin Gordhan as finance minister, with the changes roiling markets and battering business and consumer confidence. The central bank cut its benchmark rate for the first time in five years in July, citing concern about the growth outlook.
“Higher commodity prices likely continued to catalyze growth in the mining sector,” Mamello Matikinca, an economist at FirstRand Ltd.'s First National Bank unit, said in an emailed note from Johannesburg before the release of the data. “While a shallow rate-cutting cycle may provide some relief to the consumer going forward, we nonetheless expect the recovery to be short-lived given just how weak consumer confidence and real wage growth is.”
Agricultural output surged 34 percent, the agency said.
The central bank halved its economic growth forecast for this year to 0.5 percent and trimmed the outlook for 2018 to 1.2 percent from 1.5 percent. GDP expanded at the lowest annual rate since a 2009 recession last year.
The inflation rate dropped to an almost two-year low in July, reaching 4.6 percent.
The rand was little changed at 12.9543 per dollar by 11:31 a.m. in Johannesburg. Yields on rand-denominated government bonds due December 2026 were also little changed, at 8.52 percent.
The government will probably cut its output forecast in October, when Finance Minister Malusi Gigaba delivers his first medium-term budget policy statement.
In the February budget review, the National Treasury left its growth estimates unchanged from the mid-term budget in October, with the economy forecast to expand 1.3 percent this year, 2 percent next year and 2.2 percent in 2019. Annual growth has slumped since 2011, which has hampered the government's ability to reduce the 27.7 percent jobless rate.
--With assistance from Simbarashe Gumbo
To contact the reporters on this story: Arabile Gumede in Johannesburg at agumede@bloomberg.net, Thembisile Dzonzi in Johannesburg at tdzonzi@bloomberg.net.
To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Ana Monteiro, Michael Gunn
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