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South Africa’s economy shrinks 2.2% in Q1



 South Africa’s Gross Domestic Product (GDP) suffered worst quarterly contraction in nine years, shrinking by 2.2 per cent in first quarter, data from Statistics South Africa showed on Tuesday.
The agency said in Pretoria that the GDP contraction was led by a slowdown in agriculture and mining, after expanding 3.1 per cent in the final quarter of last year.
According to the agency, this is the largest quarter-on-quarter decline since the first quarter of 2009, when the economy contracted 6.1 per cent.
“The real gross domestic product expenditure fell by 2.5 per cent in first quarter after expanding by 3.1 percent in the third quarter.
“The agriculture sector shrank 24.2 per cent in the quarter due to poor horticulture output, followed by mining which fell 9.9 per cent and manufacturing down by 6.4 per cent.
“The GDP rose 0.8 per cent on an unadjusted year-on-year basis in the first quarter, compared with a 1.5 percent expansion in the previous three months,” the agency said.
The rand weakened by more than one per cent against the dollar in response.
Anylysts said that the drop was a reminder to investors of the huge challenge President Cyril Ramaphosa currently faced to deliver long term economic growth.
After Jacob Zuma was forced out as leader by the ruling party in February, Ramaphosa pledged to clean up governance, deal with high unemployment and improve basic services, igniting a wave of optimism dubbed: “Ramaphoria”.
South Africa’s economy has barely grown in the past decade with fiscal missteps and corruption contributing to weak business and consumer confidence.
However, the poor gross domestic output (GDP) in the first three months of 2018 will erode some of the enthusiasm in South Africa.
Economists polled by Reuters had expected a quarter-on-quarter GDP contraction of 0.5 per cent.
“Today’s downbeat figure will dampen some of the enthusiasm surrounding President Cyril Ramaphosa,” Capital Economics senior emerging markets economist John Ashbourne said.
“South Africans themselves were also optimistic; consumer confidence jumped to an all-time high in first quarter.
“But this ‘Ramaphoria’ does not seem to have translated into stronger spending,” he said, adding that a swift turnaround was unlikely.