{"id":378675,"date":"2020-03-03T11:45:54","date_gmt":"2020-03-03T09:45:54","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=378675"},"modified":"2020-03-03T15:50:07","modified_gmt":"2020-03-03T13:50:07","slug":"south-africa-enters-technical-recession-as-fourth-quarter-gdp-sinks","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/378675\/south-africa-enters-technical-recession-as-fourth-quarter-gdp-sinks\/","title":{"rendered":"South Africa enters technical recession as fourth quarter GDP sinks"},"content":{"rendered":"

Stats SA has published the latest GDP data for South Africa, showing that the country’s economy shrank in the fourth quarter of 2019.<\/p>\n

According to Stats SA, GDP growth for 4Q19 was recorded at -1.4%, leading South Africa into a technical recession over the period, following a decline of 0.6% in the third quarter.<\/p>\n

A technical recession is defined as two successive quarters of economic decline. This is the second such recession in two years, after experiencing the first one in 2018.<\/p>\n

A full recession requires other factors to be considered, over a longer period of time – specifically a decline in the agricultural, transport, manufacturing and trade sectors, as well as a drop in expenditure on real domestic product.<\/p>\n

The latest data from Stats SA ticks all these boxes, but these conditions typically have to persist over a greater period of time.<\/p>\n

South Africa’s economy declined by 3.2% in the first quarter of 2019 on the backdrop of renewed bouts of load shedding at the start of the year.<\/p>\n

The economic decline was reversed in the second quarter of the year, with quarter-on-quarter growth of 3.2% – but the country again saw GDP contract by 0.6% in the third quarter. This third quarter contraction has now also been revised lower to -0.8%.<\/p>\n

\"\"<\/a><\/p>\n

Taking the latest data into account, year-on-year (4Q18 vs 4Q19) South Africa’s economic growth declined 0.5%, and growth for the year overall was a mere 0.2%.<\/p>\n

\"\"<\/a><\/p>\n

The annual real GDP growth rate of 0.2% was primarily led by economic activity in finance, real estate and business services.<\/p>\n

Declines\u00a0<\/strong><\/p>\n

The transport, storage and communication industry decreased by 7.2% and contributed -0.6 of a percentage point to GDP growth. Decreased economic activity was reported for land and air transport, as well as transport support services.<\/p>\n

The trade, catering and accommodation industry decreased by 3.8% and contributed -0.5 of a percentage point to GDP growth. Decreased economic activity was reported for wholesale and motor trade and accommodation.<\/p>\n

The manufacturing industry decreased by 1.8% and contributed -0.2 of a percentage point to GDP growth. The divisions that made the largest contributions to the decrease were motor vehicles, parts and accessories and other transport equipment; and wood and wood products, paper, publishing and printing.<\/p>\n

The construction industry decreased by 5.9% and contributed -0,2 of a percentage point to GDP growth. Decreases were reported for residential and non-residential buildings and construction works.<\/p>\n

The agriculture, forestry and fishing industry decreased by 7.6% and contributed -0.2 of a percentage point to GDP growth. The decreased was mainly due to a fall in the production of field crops and horticultural products.<\/p>\n

Increases<\/strong><\/p>\n

In contrast, finance, real estate and business services increased by 2.7% and contributed 0.6 of a percentage point to GDP growth.<\/p>\n

The mining and quarrying industry increased by 1.8% and contributed 0.1 of a percentage point to GDP growth. Increased production was reported for platinum group metals, iron ore and gold.<\/p>\n

\"\"<\/a><\/p>\n

GDP outlook for 2020<\/strong><\/p>\n

Economists and analysts are not optimistic for South Africa’s growth prospects for 2020, with projections as low as 0.5% and the most optimistic at 1.0%.<\/p>\n

During his 2020 budget speech, finance minister Tito Mboweni brought estimates in line with international bodies like the International Monetary Fund and World Bank sub-1% at 0.9% for 2020.<\/p>\n

This runs counter to the 3.5% growth expected for sub-Saharan Africa in 2020 – the second-fastest growing region in the world.<\/p>\n

The rand traded at the following levels against the major currencies, shortly before 12h00 on Tuesday:<\/p>\n