Home South African SA economy unexpectedly contracts in first quarter

SA economy unexpectedly contracts in first quarter

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South Africa’s economy recorded a small contraction in the first quarter of 2024, statistics agency data showed on Tuesday, hurt by a slump in the mining and construction sectors.

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By Kopano Gumbi

PRETORIA – South Africa’s economy recorded a small contraction in the first quarter of 2024, statistics agency data showed on Tuesday, hurt by a slump in the mining and construction sectors.

Gross domestic product shrank 0.1% in quarter-on-quarter seasonally-adjusted terms. Economists polled by Reuters had expected growth of 0.1%.

On a year-on-year basis the economy grew 0.5%, compared to economists’ prediction for 0.6% growth.

The South African economy has stagnated over the last decade with rolling power cuts, high unemployment, and port and rail inefficiencies dragging down growth.

Six out of 10 industries tracked by Statistics South Africa contracted in the first three months of the year, led by construction and mining which declined 3.1% and 2.3% respectively.

A bleak backdrop for consumer spending also made a dent in first-quarter growth, as final consumption expenditure contracted 0.3%.

The South African central bank sees GDP growth of 1.2% this year, saying late last month that it expected a better second-quarter performance.

But the outlook has been muddied by last week’s election in which the African National Congress (ANC) lost its majority for the first time in 30 years and must now seek one or more coalition partners to govern the country.

“The unexpected election results mean that things have become even more uncertain, and all bets are off,” Jee-A van der Linde, a senior economist at Oxford Economics Africa, said in a research note. “A business-friendly coalition outcome would improve confidence and should unlock fresh investment that could give the economy legs to run from the second half of 2024.”

– REUTERS

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