Zuma says growth will fall below 0.5 percent, economy in “duress”

South African President Jacob Zuma

JOHANNESBURG (Reuters) – South Africa’s economy is in a state of “duress” and 2017 growth will fall short of 0.5 percent, President Jacob Zuma said late on Monday, more bad news in an economy that slid into recession in March.

“The economy is under duress … In the last budget, growth was expected to be 1.3 per cent. It is now expected that it will be below 0.5 per cent,” Zuma said in a speech at an agricultural business conference.

“The weak consumer demand and stagnant business investment in the economy continue to be a challenge,” Zuma said.

South Africa’s central bank unexpectedly cut its benchmark lending rate for the first time in five years on July 20, citing weak growth. The bank halved its 2017 growth forecast to 0.5 percent, and trimmed next year’s projection to 1.2 percent.

The 25 basis points cut to 6.75 percent was the first reduction in lending rates since July 2012 and ran counter to market consensus that rates would be held steady.

The recession in Africa’s most developed economy is adding to pressure on Zuma, who is also handling fallout from credit downgrades and massive corruption scandals that have further dented investor confidence.

South Africa’s economy is likely to have returned to growth in the second quarter of 2017 after a short recession, Reserve Bank Governor Lesetja Kganyago said on Friday.