South Africa’s economy is officially in recession

 ·6 Jun 2017

The latest gross domestic product (GDP) data released by Stats SA shows that the South African economy declined by 0.7% in the first quarter of 2017, putting the country into a technical recession.

While the economy has slowed to a crawl over the past few years, the country has managed to escape the dreaded ‘official’ recession tag.

In economic terms, a technical recession is described as two consecutive quarters of economic decline. The last quarter of 2016 showed a 0.3% decline; with the latest decline of 0.7%, South Africa fits the bill.

According to Stats SA the largest negative contributor to growth in GDP in the first quarter was the trade, catering and accommodation industry, which decreased by 5.9% and contributed -0.8 of a percentage point to GDP growth.

The manufacturing industry contracted by 3.7% and contributed -0.5 of a percentage point to GDP growth.

Seven out of ten divisions reported negative growth rates in the first quarter. The largest contributor to the decrease was the petroleum, chemical products, rubber and plastic products division.

In contrast the mining and quarrying industry increased by 12.8%, and contributed 0.9 of a percentage point to GDP growth.

Read: World Bank cuts SA economic growth projections

The agriculture, forestry and fishing industry rebounded in the first quarter of 2017 on the back of eight consecutive quarters of contraction. The industry’s increase of 22.2% in the first quarter of 2017 was mainly as a result of increases in the production of field crops and horticultural products.

One of the key indicators of the declining economy is household spending, which showed a major decline in the first quarter.

Despite the quarterly decline, it is expected that GDP growth will rebound to 0.9% in the second quarter of the year, due to positive data released over the past few months.

The last time South Africa entered a recession was 2008-9, when it had three consecutive quarters of negative growth.

Read: The big problem with South Africa’s ‘debt forgiveness’ plan

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