South Africa’s economy has moved into another recession in eight years, Bloomberg reports.
This is the second time the country’s economy is faced with economy downturn in eight years. In 2009, the country fell into recession for the first time, after it contracted for a second straight quarter in the first three months of the year.
According to the report, Gross domestic product (GDP) shrank an annualized 0.7 percent in the first quarter from a contraction of 0.3 percent in the previous three months, Statistics South Africa said in a report released on Tuesday in the capital, Pretoria. The median of 19 economists’ estimates in a Bloomberg survey was for 1 percent expansion. One economist forecast the contraction.
While rains are helping Africa’s most-industrialized economy recover from a 2015 drought that was the worst since records started more than a century earlier, political uncertainty has hampered implementing reforms aimed at boosting growth. 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.
“There is a risk that these contractions are not over and we could see another negative coming out in the second quarter of this year,” Annabel Bishop, the chief economist at Investec Ltd., said by phone from Johannesburg.
All industries except agriculture and mining contracted in the quarter, the statistics office said.
The rand lost 1.1 percent to 12.8470 per dollar by 11:42 a.m. Yields on rand-denominated government bonds due December 2026 rose 7 basis points to 8.50 percent, the first increase in five days. The six-member banks index extended declines after the release, dropping 1.7 percent in Johannesburg.
S&P Global Ratings and Fitch Ratings Ltd. affirmed South Africa’s debt at the highest non-investment grade last week, with both companies saying policy uncertainty, political turmoil and slow economic growth pose a risk to fiscal consolidation. Moody’s Investors Service, which rates the nation at two levels above junk, has the nation on review for a downgrade.
South Africa’s growth slowed to 0.3 percent, the lowest rate since 2009, after low commodity prices, the effects of the prior year’s drought and weak demand for locally made goods weighed on output. Unemployment rose to a 14-year high in the first quarter.
The central bank on May 26 reduced its forecast for growth this year to 1 percent from 1.2 percent, and trimmed the outlook for 2018 to 1.5 percent from 1.7 percent because of the anticipated impact of the downgrades.