South Africa's economy falls into recession
- Author: Zachary Reyes Jun 06, 2017,
Jun 06, 2017, 17:02
South Africa slipped into technical recession for the first time since 2009 after the economy contracted in the first quarter, led by weak manufacturing and trade sectors, Statistics South Africa said on Tuesday.
All industries except agriculture and mining contracted in the quarter, the statistics office said.
South Africa's economy contracted by 0.7 per cent in the first three months of 2017 after shrinking by 0.3 per cent in the fourth quarter of past year, lagging market expectations of a quarter-on-quarter GDP expansion of 0.9 per cent. The median of 19 economists' estimates in a Bloomberg survey was for 1 percent expansion.
The value of the rand fell by 1% on the currency markets.
He said what is particularly concerning is that the figure for so-called broad definition unemployment had risen from 35.6% in the last quarter of 2016 to 36.4% in the first quarter of this year. "From a government perspective, this is likely to put further pressure on revenue collections, which are much-needed funds that are crucial to investing in growth enhancing projects", said Tumisho Grater, an economic strategist at Novare Actuaries and Consultants.
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.
Zuma can remain as head of state until an election in 2019.
Moody's - whose Baa2 rating is two notches above "junk" - is reviewing South Africa for a possible downgrade.
What South Africa now requires is leadership that understands our economy and what it requires to grow, and appreciates that without a strong and thriving economy we will never address the injustices of our past.