- Minister projects Nigerian economy slipping into recession Q3
Nume Ekeghe with agency report
South Africa’s economy probably contracted by an annualised 40.1 per cent in the second quarter, Bloomberg quoted the country’s central bank forecasts to have revealed.
This was just as the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, yesterday said the West African country might fall into recession in the third quarter, citing the impact of low oil prices and the COVID-19 pandemic on Africa’s largest economy.
South Africa’s monetary policy committee (MPC) used that estimate for the quarterly drop in Gross Domestic Product at its July meeting, where it cut the benchmark interest rate by 25 basis points, the Pretoria-based Reserve Bank said in an emailed response to questions.
That compares with a forecast for a 32.6 per cent contraction shown in its June 29 annual report and would be the biggest decline since at least 1990. The contraction in the second quarter was mainly due to strict lockdown measures to contain the COVID-19 pandemic that resulted in plunging production and demand for goods and services, and a decrease in income and employment levels, the central bank said. Supply chains were disrupted as the nation’s trading partners were also impacted by the pandemic.
South Africa shut down industries from March 27 to limit the spread of the virus, with almost all activity except essential services halted for five weeks.
The restrictions were eased from May 1, allowing the phased reopening of some businesses and sectors. Still, many companies have closed down permanently and some of those that resumed operations are still limited as to which services they may offer.
The Reserve Bank had said in July that the economy might contract 7.3 per cent this year. The projections used at MPC meeting that month show GDP would expand on a quarterly basis in the three months through September, which means the technical recession would be over after four quarters.
Nigeria is, however, expecting its economy to slip into recession in the third quarter due to the double whammy effects of the COVID-19 pandemic and the sharp drop in the price of crude oil on the international market.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, who briefed the Council of State on the economy, told State House reporters in Abuja that she informed the council that the Gross Domestic Product (GDP) growth in the third quarter would be negative and might lead the country into recession, the second in four years.
Ahmed, represented by the Director General of the Budget Office, Ben Akabueze, said she updated the council on the crisis confronting the economy following the fall in the prices of crude oil in the wake of an oil price war between Russia and Saudi Arabia at the start of the year, and the pandemic, which hurt demand for the commodity which provides 90 per cent of foreign exchange earnings.
Data from the Nigerian Bureau of Statistics (NBS) showed a negative growth after the economy contracted by 6.1 per cent in the second quarter of the year.
Nigeria’s economy was last in recession in 2016, its first in 25 years, since when growth has been sluggish.