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Abu Dhabi, UAEWednesday 12 December 2018

South Africa slumps into recession for first time since 2009

Rand tumbles as economy unexpectedly contracted an annualised 0.7 per cent in the second quarter from the previous three months

South Africa's President Cyril Ramaphosa. The country's economy has contracted. AFP
South Africa's President Cyril Ramaphosa. The country's economy has contracted. AFP

South African President Cyril Ramaphosa suffered the same false start as his predecessor nine years ago: a recession in his first six months in office.

The economy unexpectedly contracted an annualised 0.7 per cent in the second quarter from the previous three months, Pretoria-based Statistics South Africa said in a statement Tuesday. That compares with a decline of 2.6 per cent in the first quarter and is the first recession since 2009.

The median estimate in a Bloomberg survey was for 0.6 per cent expansion. The economy grew 0.4 per cent from a year earlier.

Slack farming output and soft consumer spending has put pressure on Africa’s most-industrialized economy. Ramaphosa’s ascent to power since December initially boosted sentiment and the rand following Jacob Zuma’s corruption-plagued tenure of almost nine years, but that optimism has faded as structural reforms aren’t implemented fast enough and global trade wars, turmoil in other emerging markets sour sentiment.

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The rand fell 2.3 per cent to 15.2094 per dollar by 11:45am in Johannesburg on Tuesday.

A contraction for the fourth quarter of 2016 was later revised to show growth, resulting in this being the first recession since the financial crisis of 2009.

In addition, the statistics agency said agriculture declined the most, recording an annualised 29.2 per cent contraction, while mining production expanded 4.9 per cent from the previous quarter.

Manufacturing shrank 0.3 per cent and trade contracted 1.9 per cent.