South Africa Sinks Deeper into Recession as GDP Further Sheds 2%

By Adedapo Adesanya

Recession in South Africa deepened after the country’s economy further depreciated by 2 percent in the first quarter of 2020.

A report released on Tuesday morning by the Statistics South Africa revealed that the contraction in the nation’s economy has further extended its technical recession.

Business post reports that in the last quarter of 2019, the former Apartheid country plunged into an economic crisis before the coronavirus pandemic became widespread in early 2020.

The decline in the Gross Domestic Product (GDP) of South Africa in the first quarter of this year is the third consecutive quarter of contraction. In Q4 of 2019, the GDP declined by 1.4 percent.

The 1.4 percent fall followed an earlier contraction of 0.8 percent in the third quarter of 2019, which means that the economy was in recession for the last half of 2019.

For the whole of 2019, the South African economy grew by only 0.2 percent (in real terms) from the previous year growth of 0.8 percent.

In a breakdown, the electricity, gas and water industry contracted by 5.6 percent in the first quarter, largely due to decreases in electricity distributed and water consumption.

The construction industry decreased by 4.7 percent, these decreases were reported for residential buildings, non-residential buildings and construction works.

The mining and quarrying industry also decreased by 21.5 percent and contributed 1.7 percentage points to GDP decline. There was a drop in production for iron ore, manganese ore, other metallic minerals and chromium.

The manufacturing industry contracted by 8.5 percent in the first quarter. Seven of the 10 manufacturing divisions reported negative growth rates in the first quarter.

The latest data, however, beat analysts’ expectations for a contraction of 3.8 percent in the first quarter.

A strict nationwide lockdown from late March has been partially eased to allow key sectors like mining, manufacturing and retail to resume operations, but the outlook remains gloomy. The SA Treasury sees GDP contracting by 7.2 percent this year.

The country also said first-quarter spending in the economy shrank 2.3 percent compared with October-December which had contracted 1.2 percent from the prior quarter.