What does a technical recession mean and what is the impact?

06/09/2018

Recession is defined as a substantial decline in the economy’s following five economic indicators: real gross domestic product (GDP), income, employment, manufacturing, and retail sales. The difference between a recession and a technical recession lies in the succession of the economic decline on a year-on-year basis.

Stats SA released its latest GDP (gross domestic product) data and announced that South Africa is currently experiencing a technical recession. A country’s economy experiences a technical recession when it has two consecutive quarters of a decline in the GDP. Gross domestic product is defined as the total value of everything produced by all the people and companies in the country. According to Fin24, the key indicators of the recession include the country’s Agricultural sector, Transport and Trade sectors, Expenditure on real domestic product, as well as the Manufacturing industry. Click to read the full article

How recession will affect you

  • Jobs and employment- Unemployment rates run extremely high during a recession, and this is because of the decline in investment into the country.
  • Investing- With the recession affecting the interest rate, fuel and food prices, family budgets may not accommodate short and long-term investments during a recession. Families may put investment accounts on hold, hoping to play catch-up at a later date.
  • Interest rates- When the economy is weak, the Rand also declines and therefore could mean an increase in interest rates. Interest rates further affect food and fuel costs. Senior economist at the Bureau of Economic Research, Hugo Pienaar, advises that consumers be prudent with their hard earned money in the coming months.

Whilst the negative growth the country has experienced in the past few months is something to be concerned about, The South African Government News Agency predicts that South Africa is likely to exit technical recession in 3rd quarter. These 5 tips will help you make your money work for you during a recession.

How to make your money work for you during a recession


1. Build an emergency fund- Always be prepared for emergencies like car repairs, medical bills, unexpected home repairs etc. 
2. Get rid of debt- When you get the debt out of your life, you reduce your revolving payments, free up more of your income, and reduce the risk in your life. It’s the best way to protect yourself during a recession!
3. Empower yourself by knowing- If you really want to stay ahead of financial ups and downs, you need to understand economics, investments and what’s going on in your own life and the world around you. There are always articles online that can help you understand these aspects.
4. Tighten the spending belt- Families must understand the difference between needs and wants during a recession. As priorities shift for many families during recession, you can focus on the necessities.

The effects of a recession lasts a lot longer than the duration of a recession. Ultimately, almost everyone suffers during an economic downturn. You can survive by adapting to a new lifestyle, working together, and making changes to improve your future.

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Our mission is to be a successful Retail Bank offering a wide range of products and services to the consumers of South Africa. The people who work for African Bank represent the diverse population of South Africa; therefore we are a reflection of you, of all South Africans. We seek to provide value - more than our consumers expect of us. We promise to live our purpose 'humanity through banking' in all that we do and we are confident that we can, because 'We are You'.