What is the technical recession?

In tough financial times, more consideration has to go into everything you do – from looking at property for sale in Durban to simply stocking up on groceries. And 2018 has certainly been a difficult one financially in South Africa.

Lately, a lot of talk has been centred around the technical recession, but for those who are not financial experts, it can all seem a little confusing. To assist you, we look at what it means to have moved into a technical recession and how it all came about.

Let’s first look at what a technical recession is. Basically, the country moves into a technical recession after there has been a negative growth in the economy over two back-to-back quarters. In September, it was revealed by Statistics South Africa that the economy had seen negative growth in both the first and second quarters of 2018, which indicated that the economy was shrinking instead of growing.

This signalled the start of the technical recession, despite the Treasury having previously indicated that they were expecting growth of around 1.5% in the economy this year. Currently, this does not seem achievable and means that South Africans will have to continue tightening their belts.

The impact of this reaches far and wide, and due to the fact that South Africans already had to deal with a VAT increase this year, as well as escalating fuel prices, the strangle on household finances is pretty intense.

There is also the issue of the weaker rand, which not only impacts travel opportunities, but also import costs and even makes it more difficult for those looking to enter the property market to get the finance that they need.

To survive through tough times like these, it is important for you to stay on top of your budget and make sure that you don’t take on debt that could come back to haunt you if further increases arrive in the remainder of the year.