South Africa’s rand plunged to a new all-time low against the U.S. dollar on Monday, recording its biggest daily loss in 19 months as rising concerns about waning growth in China hit commodity currencies.
“The real economy in the second quarter has performed negatively”, Statistician-General Pali Lehohla told a press briefing in Pretoria.
The mining industry contracted by 6,8% quarter-on-quarter, mainly as a result of lower production in the mining of coal and iron ore.
The rand is among the “commodity-linked, high-yielding currencies where a lot of foreign funds were parked”, said Nizam Idris, Singapore-based head of foreign-exchange and fixed- income strategy at Macquarie Bank Ltd. “A lot of these flows are being reversed right now”.
“Part of the problem, to be honest, is this slow grind of under performance”, he said.
Gross domestic product fell a seasonally and annualized 1.3 percent in the second quarter, confounding economists’ expectations for a 0.6 percent climb.
“An economic contraction may occur, obviously it’s captured in the GDP”.
The economy expanded by 1.2 percent on an unadjusted year-on-year basis in the second quarter, compared with growth of 2.1 percent in the previous three months.
On Tuesday, economists at Nedbank said the economic outlook remains relatively weak.
Business Day said the rand was the worst affected among 25 emerging market currencies struggling as China’s economy weakened.
“We still forecast GDP growth of 2 % in 2015 as a whole followed by a slower 1.8 % in 2016”.
“South Africa needs to have a shock to the system, which it arguably has had through Eskom, but that hasn’t been enough to shift the political status quo”.