South African economy slips into red in 4Q

Special Report:Global Financial Crisis

by Liang Shanggang

JOHANNESBURG, Feb. 24 (Chinese media) -- South Africa's

economy slipped into the red for the first time in a decade in the fourth

quarter of 2008, weighed down by a huge fall in manufacturing output.

Gross domestic product contracted by 1.8 percent

quarter-on-quarter on a seasonally adjusted and annualized basis, Statistics

South Africa reported on Tuesday.

This was compared with a 0.2 percent growth in the

third quarter.

Should first quarter growth in 2009 also shrink, then

South Africa would technically be in a recession.

The main contributors to the decrease in economic

activity for the fourth quarter of 2008 were the manufacturing industry (-3.5

percentage points) and the electricity, gas and water industry (-0.1 of a

percentage point).

The wholesale and retail trade, hotels and restaurant

industry and the mining and quarrying industry each contributed zero percentage

points to the total economic growth.

The contributions by other industries were positive

including finance, real estate and business services industry and the general

government services (each contributing 0.6 of a percentage point), the

agriculture, forestry and fishing industry (0.5 of a percentage point), the

construction industry (0.4 of a percentage point) and the transport, storage and

communications industry and personal services (each contributing 0.2 of a

percentage point).

"It's surprising how robust some sectors are, such as

government, finance and personal services but the magnitude of the drop in

manufacturing brought it all down," said Rashad Cassim deputy director general

at Statistics South Africa.

Manufacturing's performance was indeed gloomy,

falling by a record 21.8 percent quarter-on-quarter.

The economy grew by 3.1 percent for 2008. However,

this was in contrast with 5.1 percent in 2007.

Razia Khan of Standard Chartered Bank said the fourth

quarter GDP figure might on its own not convince the South African Reserve Bank

to call a meeting to cut rates.

"We're still not entirely convinced, although we

would be hesitant to rule it out entirely given the SA Reserve Bank governor's

(Tito Mboweni) public comments on this issue," Khan said.

"Our core scenario is still for a 100 basis point

rate cut at the April Monetary Policy Committee meeting."

Khan said with third quarter growth un-revised at 0.2

percent quarter-on-quarter, the country had averted a technical recession for

now, at least.

"Going forward, the big question for the economy is

whether a domestic resurgence, boosted perhaps by monetary easing, will be

sufficient to compensate for global headwinds," she said.

She added that the breakdown of the fourth quarter

picture was telling.

The manufacturing data, more than any of the other

components of GDP, was likely to reflect the slump in South Africa's trading

partners, and weak demand for auto exports in particular, she said.