Stats SA has published the latest quarterly GDP data, covering the first quarter of 2019, showing a larger contraction than expected.
The data shows that South Africa’s GDP declined by 3.2% in the first quarter – a much bigger drop than estimations of around a 1.6% decline.
The drop was mainly driven by declines in manufacturing and mining, the stats body said, with the final figure reflecting the largest quarterly drop in about 10 years.
The primary sector declined by 11.4% as agriculture recorded a 13.2% drop and mining declined by 10.8%. The secondary sector recorded a drop of 7.4% driven by declining manufacturing and electricity industries.
Government recorded a 1.2% growth mainly as a result of short-term employment in the civil service in the run-up to the elections, Stats SA said.
But despite growth in the government, finance and personal services industries, the tertiary sector declined by 0.7%.
The news caught analysts by surprise, sending the rand to new intraday lows, weakening to R14.59 to the dollar (dropping by 1.1%).
Annual GDP estimates for South Africa prior to the announcement ranged between 0.8% and 1.3%, with leading investment groups pegging the forecast at 1.0%
However, economists have noted that the bigger than expected decline in Q1 GDP spells trouble for South Africa’s 2019 growth forecast, with some predicting that the country would struggle to hit 0.5%.
“This is the biggest decline in GDP since the 2008 financial crises, highlighting the dire state of the South African economy,” said Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions.
“The drop in GDP can largely be attributed to load shedding, low wage growth and higher income tax.”