South Africa is not in recession – Gordhan

South Africa’s current account deficit narrowed more than expected in the second quarter, data showed on Tuesday, supporting Finance Minister Pravin Gordhan’s view that Africa’s most industrialised economy was not in “recession territory”.

He warned, however, that surprising economic growth of 3.3 percent in the second quarter could not be sustained and pledged continued fiscal prudence, a key recommendation by ratings agencies.

“The next year or so is quite critical, not just for ratings but for ourselves as an economy and as a country as well,” Gordhan told business leaders.

South Africa’s current account deficit narrowed to 3.1 percent of GDP in the second quarter, better than the 3.6 percent predicted by analysts and down from 5.3 percent in the first quarter.

The rand pared losses after the data were released. It had dropped as much as 1 percent in early trade, following a warning by Deputy Finance Minister Mcebisi Jonas that a police investigation into Gordhan was causing economic uncertainty.

Gordhan declined last month to obey a police summons linked to the inquiry into whether he had used a tax service unit to spy on politicians, including President Jacob Zuma. Gordhan said he had done nothing wrong and his supporters have called the investigation a witch hunt.

Divisions within the African National Congress have widened since the ruling party suffered its worst-ever local election results last month. Analysts say the rifts result from a power struggle between Zuma and Gordhan.