South Africa’s Economy Contracts in Q1 as Recession Worsens

South Africa’s Economy Contracts in Q1, 2020

South Africa, Africa’s second-largest economy, contracted in the first quarter amid a broad-based decline across key sectors.

According to Statistics South Africa, the economy contracted by 2 percent in the first quarter, down from the final quarter of 2019 when the economy plunged into recession.

The economy has now contracted for three consecutive quarters after it dipped by 1.4 percent in October-December.

The report shows the mining sector of the economy shrank by 21.5 percent in the first quarter, while the manufacturing sector declined by 8.5 percent. The two pillars of the economy.

Fixed capital also plunged by more than 20 percent, making it the worst reading for investors since the 2008 crisis.

“When an economy’s starting point — even prior to the Covid-19 lockdown — is an unemployment rate that is over 30 per cent, it is difficult to imagine what further deterioration looks like,” said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.

With COVID-19 severely slowing down economic activity in South Africa throughout the second quarter, it means the outlook for the economy remains weak and gloomy for the rest of the year.

“There is no room to continue to spend ineffectually..There is no room left to continue to get it wrong,” Ms Khan said.