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South African Economy Shrinks in Further Hit to Government Forecasts 

South African Economy Shrinks in Further Hit to Government Forecasts 

(Bloomberg) --

South Africa’s economy contracted for a second quarter this year in the three months through September as farming, mining and factory output slumped. The rand extended its decline against the dollar.

Gross domestic product shrank an annualized 0.6%, compared with a revised 3.2% expansion in the second quarter, Statistics South Africa said Tuesday in the capital, Pretoria. The median estimate of 14 economists in a Bloomberg survey was for no growth. The economy expanded 0.1% from a year earlier.

South African Economy Shrinks in Further Hit to Government Forecasts 

Key Insights

  • The contraction means full-year economic growth, which hasn’t exceeded 2% since 2013, could be even lower than the 0.5% projected by the Treasury in October. That will add to the woes of an economy buckling under failing state companies and ballooning debt that’s been sapping business and consumer confidence.
  • The continued lack of growth will weigh on the government’s revenue collection and make it even more difficult to lower an employment rate that’s close to 30% and that’s seen as one of the biggest obstacles to reducing poverty in one of the world’s most unequal nations.
  • Credit ratings companies have been flagging deteriorating debt metrics due to low GDP growth and high budget deficits as a key risk. Tuesday’s GDP data makes it even more likely that South Africa will lose its last remaining investment-grade assessment from Moody’s Investors Service.

--With assistance from Simbarashe Gumbo.

To contact the reporters on this story: Gordon Bell in Johannesburg at gbell16@bloomberg.net;Adelaide Changole in Nairobi at achangole2@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Rene Vollgraaff, Paul Richardson

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