NEWS

South Africa Is Now Officially In A Recession As The Economy Keeps On Shrinking

It comes after two consecutive quarters of negative growth.

06/06/2017 12:38 SAST | Updated 06/06/2017 19:08 SAST

South Africa is now officially in its first recession since 2009 after gross domestic product (GDP) shrank by 0.7% in the first quarter of the year, following a 0.3% contraction in the last quarter of 2016.

Statistics South Africa said weak manufacturing and trade sectors led the recession, with falls of 3.7% and 5.9% respectively.

Production in the trade sector dropped across all divisions, particularly in catering, accommodation and wholesale trade, Stats SA reported. Manufacturing found itself "hamstrung" by lower production levels in seven of its 10 divisions, especially petroleum and chemical products.

Stats SA continued:

Possibly the most important aspect of the first quarter's results is the tertiary sector. The sector – comprising finance, transport, trade, government and personal services – recorded its first quarter of decline since the second quarter of 2009, when South Africa was in a recession as well.

There was some positive news in the farming and mining sectors, which showed growth in the first quarter.

A jump in production in field crops and horticultural products lifted the farming industry in the first quarter as the sector started to recover from one of the toughest droughts in recent history.

Mining's growth was mainly as a result of the rise in gold and platinum production.

While rain is helping the economy recover from a 2015 drought that was the worst since records started more than a century earlier, political uncertainty has hampered growth, reported Bloomberg.

President Jacob Zuma changed his Cabinet and fired Pravin Gordhan as finance minister in March, a move that saw the nation lose its investment-grade status with two ratings companies for the first time in 17 years.

Household consumption declined by 2.3% with spending on food and non-alcoholic beverages, clothing and footware, and transport the major contributors to negative growth, reported Fin24.

Fitch and S&P cited political uncertainty as their reasons for downgrading South Africa to junk status.

Read the full Stats SA report.

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