Minister in the Presidency Jeff Radebe and Finance Minister Pravin Gordhan attend a media in Pretoria. Picture: SIYANSANGA MBAMANI
Minister in the Presidency Jeff Radebe and Finance Minister Pravin Gordhan attend a media in Pretoria. Picture: SIYANSANGA MBAMANI

THE economy was not in recession and was not projected to slide into one, whatever doomsayers might say, Finance Minister Pravin Gordhan said on Thursday.

Economists, though, disagree with the minister’s positive estimate on SA’s economic outlook, saying that a recession — technically two consecutive quarters of contraction — is highly likely this year.

The Treasury is due to update its growth forecasts for the next three years when Mr Gordhan tables the 2016-17 budget in Parliament next month.

They are expected to be lower than the projections made in the October medium-term budget policy statement.

Rejecting the possibility of a recession in the near term, Mr Gordhan pointed to World Bank forecasts for SA’s growth for the next three years that ranged between 1.4% and 1.6%.

But economists pointed out that, while the annual growth rate might be positive, a recession could occur within it.

"We are growing as an economy, but we are not growing fast enough, and not inclusively enough. We are not solving the problems of inequality, poverty and unemployment adequately," Mr Gordhan said at a media briefing led by Minister in the Presidency Jeff Radebe. The briefing related to the special Cabinet meeting on the economy held on Wednesday.

Lefika Securities chief economist Colen Garrow said on Thursday the odds were stacked against SA. Apart from the state of the global economy and the fallout in the commodity markets and the rand exchange rate, there was the drought and rising interest rates domestically.

Mining and manufacturing production figures were also pointing in one direction.

"It is just a question of timing when SA is going to fall into recession. I would like to know where the minister thinks the growth is going to come from because I can’t see it. A crisis of our own making is unfolding," Mr Garrow said. "Our policy mix is totally out of line."

Monetary and fiscal policies were not synchronised to stabilise the economy.

Pan African Investment and Research Services CEO Iraj Abedian said while there was no evidence that SA was in a recession, there was no productive sector of the economy that would cushion growth in the near future.

"The fact is that government has not come up with any mitigating package of policies that would either stop the rot, or reinvigorate growth. You can rest assured that if left to itself, the economy will go into recession.

"To underestimate the severity of the contractionary momentum under way would be a folly," Mr Abedian said.

Mr Radebe and Mr Gordhan both emphasised the global contributors to SA’s economic woes, focusing on the slump in commodities’ demand and prices.

The US economic recovery was likely to result in rising global interest rates, while its tightening of monetary policy would put pressure on capital flows and growth expectations.

Capital market volatility would increase "significantly", Mr Radebe warned.

In addition to these global challenges, SA was beset by its own structural problems, including electricity-supply constraints and a severe drought.

Cabinet decided government needed to intervene "strategically and more decisively" to restore the momentum of economic growth. It would seek to build consensus with business and organised labour on the actions required to stabilise the economy, build confidence and raise investment and growth.

"Cabinet endorsed stronger measures to restore a sustainable fiscal path, taking account of the weakened outlook for the global economy and its domestic consequences," Mr Radebe said. Mr Gordhan will announce these measures in his budget.

Mr Gordhan stressed that the government was working hard to set SA in a different direction and to create more optimism.