South Africa's Gordhan says economy recovering.

CAPE Town -South Africa's economy is recovering, supported by improved electricity supply, easing drought and a depreciation in the real exchange rate among other factors, Finance Minister Pravin Gordhan said on Monday.

Gordhan however told a labour union conference that macroeconomic stability was crucial to cushion the economy from potentially volatile capital flows in an uncertain global environment.

In his October mid term budget statement to parliament, Gordhan slashed the 2016 economic expansion forecast to 0.5 percent from the 0.9 percent predicted earlier by the Treasury, but said GDP growth would recover to 1.3 percent next year.

"In terms of the numbers that we see, we believe we are in the process of recovering as an economy," he said on Monday at a conference of the National Union of Metal Workers of South Africa (Numsa) in Cape Town.

Data showed last week that the economy had barely advanced, expanding by 0.2 percent in the third quarter as manufacturing contracted sharply.

Africa's most industrialized country held on to its investment grade credit ratings with Moody's, S&P and Fitch all affirming its investment status, albeit with a negative outlook, and a warning that the weak economy was a risk.