TECHNICAL RECESSION WILL LIKELY HIT DOMESTIC TOURISM HARDEST
The latest Stats SA Gross Domestic Product (GDP) report for Q1 2017 shows that the South African economy has officially slipped into a technical recession, after recording two consecutive quarters of negative GDP growth. In Q4 2016, the economy shrunk by 0.3% and the latest figures show that the negative trend continued, with an even lower showing of -0.7 GDP growth for Q1 2017. Click here to view a summary presentation on the Q1 2017 GDP results.
Of concern, it was a sharp decrease of 5.9% in the Trade, Catering and Accommodation sectors that contributed the most (-0.8%) to the slump in GDP. Unsurprisingly, our TBCSA Tourism Business Index results for Q4 2016 echoed similar sentiments from business, citing factors related to the performance of the economy, particularly the cost of inputs and the cost of labour as contributing negatively to business performance. So where to from here?
South Africans are being urged to tighten their belts, although there is a glimmer of hope that Q2 GDP figures may reflect a more improved performance boosted by better performance in the agricultural and mining sectors. Nonetheless, as more corporate and household budgets get tighter, the implications are that domestic travel and tourism will be affected. Businesses will also be encouraged by Moody’s announcement in the week of not yet downgrading South Africa to junk status.
Now more than ever; time for private-public partnership
TBCSA welcomes the immediate announcement by Cabinet that The Minister of Finance, Malusi Gigaba, will soon meet with business leaders in a bid to formulate strategies to counter the economic recession. Now more than ever is the need for both the public and private sectors to work together in the interest of fast tracking economic growth and elevating the country’s credit ratings status.