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May 26 (Bloomberg) -- South Africa’s gross domestic product contracted
in the first quarter, pushing Africa’s biggest economy into recession
for the first time in 17 years as manufacturers and miners scaled back
output and fired workers.
GDP fell an annualized 6.4 percent, the most since the third quarter
of 1984, after declining 1.8 percent in the final quarter of 2008, Statistics
South Africa said in a report released in Pretoria today. Economists surveyed
by Bloomberg had forecast a 3.9 percent drop in output.
“It’s an extremely ugly number,” said Nicky Weimar, an
economist at Nedbank Group Ltd., South Africa’s fourth-largest bank.
“We all underestimated the extent of the decline.”
The recession snaps more than a decade of economic growth, the longest
period of expansion on record, putting pressure on newly installed President
Jacob Zuma as he pledges to slash poverty and unemployment. Miners such
as Anglo Platinum Ltd. and Lonmin Plc are firing thousands of workers,
while manufacturers including Sappi Ltd. and ArcelorMittal South Africa
Ltd. scale back production as exports slump.
The rand extended its decline after the release of the data, before gaining
to 8.3625 as of 2:08 p.m. from 8.3643 before the data was released.
The government is unlikely to achieve its growth target of 1.2 percent
for this year set in the budget, the Treasury said in a statement. Still,
the contraction in the second quarter is “expected to be smaller”
than the previous three months, it added.
Rebound
The economy will probably rebound in the second half of the year, National
Treasury Director-General Lesetja Kganyago told reporters in Pretoria
today.
The drop in the first half will make it difficult for the government
to meet its target of cutting the unemployment rate to 14 percent by 2014.
The jobless rate, the highest of 62 countries tracked by Bloomberg, rose
to 23.5 percent in the first quarter from 21.9 percent in the previous
three months, according to the statistics office.
“The implications are frightening for jobs, living standards and
economic growth,” the Congress of South African Trade Unions said
in an e-mailed statement today. “This is a massive national crisis
which requires an immediate response from government, labor and business
to defend our jobs and livelihoods.”
Rate Cuts
The central bank has cut its benchmark interest rate four times since
December, pushing it to 8.5 percent to spur consumer spending. It will
lower the rate again by half a percentage point on May 28, according to
13 of 22 economists surveyed by Bloomberg.
The labor federation called on the Reserve Bank to cut the key rate by
2 percentage points.
Manufacturing, which accounts for 15 percent of the economy, fell a record
22.1 percent in the first quarter, after a 21.8 percent drop in the previous
three months, the statistics office said. Mining contracted an annualized
32.8 percent, the biggest drop since records began in 1960, mainly because
of a slump in platinum production.
The retail industry contracted for a fourth consecutive quarter, with
output dropping an annualized 2.5 percent. The finance and real estate
industry, which makes up a fifth of the economy, dropped an annualized
2.3 percent in the first quarter, compared with 3 percent growth in the
previous three months.
An improvement in these industries “is going to be a function of
the global economy,” Kganyago said. There are “tentative signs
of a recovery in the global economy” and South Africa has “underlying
strengths,” he added.
Construction, one of only three industries to expand last quarter, grew
an annualized 9.4 percent, down from 10.8 percent growth in the previous
three months. General government services and personal services, including
health and education, also grew.
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Newsletter:
25 May 2012 2012 to 1 June 2012 - Dullstroom, Mpumalanga, South Africa
