The country's manufacturing sector took advantage of the weakened rand, helping Q2 growth reach 3 percent, up from 0.9 percent in Q1 of this year. Manufacturing makes up about 15 percent of South Africa's overall GDP, and in Q2 the manufacturing sector rose to 11.5 percent.
The South African rand has depreciated almost 20 percent this year against the US dollar. The country's manufacturing sector took advantage of the weakened rand, helping Q2 growth reach 3 percent, up from 0.9 percent in Q1 of this year. Manufacturing makes up about 15 percent of South Africa's overall GDP, and in Q2 the manufacturing sector rose to 11.5 percent. However, instability in the labor market caused by strikes in the automotive manufacturing and gold mining sectors over the last year have hurt South Africa's potential for further growth.
Economists have noted that South Africa is particularly vulnerable to QE tapering because it consistently runs a current account deficit of more than 5 percent of its GDP. In fact, South Africa's current account deficit widened to 6.5 percent in Q2, which is more than the 5.8 forecasted by economists.
Other domestic factors have played a hand in South Africa's slowing economy. Concerns about structural problems in the economy have also raised concerns, as has the steady 25 percent unemployment rate.
Inflation in the country has reached the upper limit of the 3 to 6 percent range; however, the South African government does not plan on raising interest rates. According to economists, South Africa's GDP data leaves little room for its reserve bank to cut interest rates. Instead, the government is focused on domestic plans that will improve the economy and create more job opportunities. This includes accelerating infrastructure programs, stabilizing the mining sector, improving support for the small business sector by creating a one-stop shop and portal for SMMEs, etc.