South African economy shrank 3% in second quarter
South Africa’s first economic recession in 17 years extended into the second quarter as manufacturing production slumped, making it difficult for President Jacob Zuma to meet his jobs and spending targets.
Gross domestic product fell an annualized 3 percent from the first quarter, when it dropped 6.4 percent, Statistics South Africa said in a report released in Pretoria today. The median estimate of 22 economists surveyed by Bloomberg was for a 3.3 percent contraction.
The first global recession since World War II has slashed demand for platinum, South Africa’s biggest export, and vehicles, forcing manufacturers and mines to fire thousands of workers. The slump has also curbed tax receipts, swelling the budget deficit, which the government forecast in February would reach a decade-high of 3.8 percent of GDP this year.
“The first quarter was the bottom” of the recession, said Adenaan Hardien, chief economist at Cadiz Asset Management in Cape Town. “The trend is an improving one, but it’s not happening as quickly as people would like. Domestic demand is still weak.”
The rand was at 8.0513 per dollar at 11:48 a.m. in Johannesburg, little changed from before the report.
Finance Minister Pravin Gordhan said yesterday South Africa’s economic recovery will lag behind that of the global economy. On July 1, he estimated growth of only about 2.5 percent to 3.5 percent for “several years” once the economy recovers.
Manufacturing contracted an annualized 10.9 percent in the second quarter, after declining a record 22.1 percent in the previous three months, the statistics office said. Mining expanded 5.5 percent, after shrinking 32.8 percent in the prior quarter.
The retail industry contracted for a fifth consecutive quarter, with output dropping an annualized 4.5 percent. The finance and real-estate industry shrank 2.4 percent. Construction grew 12.2 percent, up from 9.4 percent in the previous three months.
Zuma, who was elected in May, has pledged to cut the jobless rate to 14 percent by 2014 from the current 23.6 percent, the highest of 62 countries tracked by Bloomberg. In his first state-of-the-nation address on June 3, Zuma vowed to create 500,000 jobs this year, mainly temporary employment through a public works program.