Johannesburg / Washington – South African economy, which is one of the developing economies of the world, has been severely hit by a recession. A decline in the agriculture, transport, retail and communications sector, has resulted in a slowdown in the growth for the second consecutive quarter and the government has conceded that the economy is in recession. Meanwhile, there is also a major decline in the share markets of Europe and Asia, as also in developing economies like China, Russia, India, Brazil, Turkey, Argentina and Indonesia are feared to be on the brink of a fresh economic crisis.
On Tuesday, the South African government declared the statistics on its economy. The statistics show a decline in the economy for two successive quarters of 2018 and state that it had shrunk by 0.7%. In the first quarter as well, the South African economy had shrunk by 2.6%. This is the first instance of a decline in the South African economy for two successive quarters since the recession in 2009. In every financial year during the four-year-period from 2014 to 2017, only one quarter showed negative growth. However, a decline in two successive quarters this year has given a major jolt to the South African government.
After the declaration by the South African government regarding the recession in the economy, the value of the South African currency – ‘Rand’ slumped by more than 1.5%. The rand is falling consistently over the last few months and has depreciated by more than 20% against the US dollar in the last eight months alone. The decline is attributed to the strengthening of the dollar as well as to the decline in other leading currencies along with the land improvement decision taken by the South African government.
While the South African economy is being hit by a recession, other emerging economies also are said to be on the verge of a crisis. The strengthening of the US dollar is evident from the statistics published by the US administration. Similarly, the trade war initiated by US President Trump against China and Europe seems to be affecting the economies of other countries as well. At the same time, the effects of the sanctions imposed on countries like Russia and Turkey are also being felt.
In the last few days, the currencies of Russia, India, Brazil, Turkey, Argentina and Indonesia are steadily falling against the US dollar. Along with these countries, the Southeast Asian countries, also listed among the developing economies, have US debt bonds worth almost $3.5 trillion. The strengthening of the US dollar and the fall in currencies of these countries is increasing the intensity of the jolts that their economies are experiencing.
On Tuesday, the share markets across Europe and Asia experienced a major slump. Indonesian stock market fell by 4% and the Chinese index fell by 2%. There are also reports of a collapse in the indices in London and European markets. International analysts express fears over the decline in the currency value, a slowdown in South Africa and fall in the share markets which could deliver a blow to the global economy.