South African economy shrinks for third straight quarter

South Africa’s economy contracted for a third straight quarter, although the decline was less than expected.

Gross domestic product shrank an annualized 2% in the three months through March, compared with a 1.4% decline in the final quarter of 2019, Statistics South Africa said Tuesday in the capital, Pretoria. The median estimate of 15 economists in a Bloomberg survey was for a 4% decline in output. GDP contracted 0.1% from the same period a year earlier.

This is the first time since 2009 that a South African recession has lasted longer than two quarters, and the contraction will probably continue, and deepen, in the three months through June. That’s after the government implemented a strict lockdown from March 27 to curb the spread of the coronavirus. For five weeks, only essential services were allowed to remain open.

While the restrictions were eased from May 1, allowing the phased reopening of some industries, many businesses had shut down permanently and job losses surged.

“While this was nowhere near as bad as the market had feared, there is little in the data to be upbeat about,” Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank, said in an emailed note. “The case for reform in South Africa is now more urgent.”

Confidence Slump

Business confidence, which slumped to a 35-year low in April, was already weak before the virus struck. That weighed on fixed-investment spending as private-sector companies were wary of committing to projects. Gross fixed capital formation dropped for a second straight quarter, by an annualized 20.5% in the three months through March.

The National Treasury forecasts Africa’s most industrialized economy will contract by 7.2% this year due to the virus and restrictions to curb its spread. That would be the deepest decline since the Great Depression, when output fell by 6.2% in 1931.

These are some the rates of change in the GDP release:

  • Expenditure of GDP fell an annualized 2.3%
  • Household consumption expenditure rose an annualized 0.7%
  • Agriculture rose an annualized 27.8%
  • Mining fell an annualized 21.5%
  • Manufacturing fell an annualized 8.5%
  • Trade industry contracted an annualized 1.2%

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South African economy shrinks for third straight quarter