South Africa was heavily hit by increasing power shortages in Q1 (-2.3% y/y), with a key impact on GDP growth (-0.8% q/q) and the fiscal balance that is on the trajectory to reach -5.5% of GDP in 2019. The growth observed in Q1 was the worst since the Global Recession ten years ago and South Africa is now expected to experience stagnation in 2019. This weak momentum has put public debt on a higher path, we expect it to reach 62.5% of GDP by 2020. Cash constraints in SOEs mean also a need for fresh money that could have an impact on the overall public debt ratio (+12pp, considering current existing state guarantees). Looking forward, the debt problem in SOEs should continue to deter investment which contracted in the last five quarters. The outlook for private consumption is also meager, given that Q1 2019 (-0.2% q/q) marked the first contraction since Q1 2016 and the renewed decline of car registrations in May (-5.7% y/y).
