Despite hopes of an end to South Africa’s longest ever mining strike, the Fitch ratings agency has changed its outlook on the country to negative from stable.
It partly blamed the impact of the crippling five-month strike that has disrupted global platinum production.
The walkout by 70,000 miners triggered a decline in national output in the early part of the year – the first GDP contraction since 2009.
Fitch said the outlook for South Africa’s economic growth has deteriorated due to – among other things – increased strike activity and high wage demands.
It also flagged up sharp fall in manufacturing output and electricity constraints.
Nationwide business confidence slumped to its lowest since the start of the millennium in May, while consumer data such as vehicle sales have shown 10 percent year-on-year declines in the last two months.
South Africa’s central bank Governor Gill Marcus has played down the threat of a full recession but was hardly sanguine about the outlook for an economy overtaken this year by Nigeria as Africa’s largest.
“Even if a recession is avoided, it will be cold comfort if the growth rate is a weak positive number,” she said recently.
“It behoves us all – government, business and labour – to rebuild the confidence and trust that is an imperative to change the negative trajectory that the economy is presently on.”
Her deputy, Lesetja Kganyago, has put it more bluntly saying: “Monetary policy can help staunch the bleeding but it cannot heal the patient.”
Fitch has revised down its forecasts for GDP growth to 1.7 percent in 2014 (from 2.8 percent in its rating review in December 2013) and 3.0 percent in 2015 (from 3.5 percent).
It said: “Downward growth revisions have become a persistent pattern, pointing to the economy’s susceptibility to shocks and possibly weaker potential growth.”