South Africa's economy contracted in Q1 2017 by 0.7% (qoq, sa, annualized), following a 0.3% contraction in Q4 2016: the country slips into technical recession. Data lagged market expectations of a 0.9% expansion. With unemployment at a record 27.7% in Q1 2017 and inflation still close to the upper end of the inflation target range, retail and hospitality sectors are expected to keep suffering in 2017.
Nevertheless, the rebound in the agricultural sector, which grew solidly in Q1, is likely to support a gradual recovery from the 0.3% growth recorded in 2016.
Heightened political uncertainty, after the controversial cabinet reshuffle and fuelled by the President facing fresh corruption allegations, seems unlikely to deflate in the next months. For all of those reasons, Coface maintains its forecast of 0.8% GDP growth in 2017.
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