South Africa slumped into its first recession since 2009.
The economy shrank by an annualized 0.7% in the first quarter after contracting by 0.3% in the prior.
That was below economists’ expectations of 1.0% quarter-over-quarter annualized growth, according to the Bloomberg estimate.
A technical recession is defined by two consecutive quarters of economic contraction.
Perhaps most notably, these figures predate the sacking of Finance Minister Pravin Gordhan. In other words, the data released Tuesday doesn’t include any potentially negative economic effects from the domestic political drama.
“Gordhan was sacked on 31st March, so any hit to confidence and output occurred in Q2,” said John Ashbourne, Africa economist at Capital Economics, in a note. “But today’s data suggest that things were much worse than we — or most analysts — had expected before this latest shock.”
Moreover, the economic slump comes amid rapid growth in agricultural and mining sectors, Ashbourne added. Agricultural GDP rose by the fastest rate in over 10 years at 22.2% quarter-over-quarter annualized.
“So it is impossible to blame today’s surprisingly bad result on poor weather or variations in output from volatile sectors,” he explained. “Instead, the slowdown in Q1 was due to much worse results from usually stable consumer-facing sectors that had been the key drivers of growth in recent years.”
At the end of March, South African President Jacob Zuma reshuffled his cabinet, replacing ministers and deputy ministers, including his respected finance minister, with mostly loyalists and political allies. South Africans went out to protest.
Against the backdrop of all this, the country has been struggling with sluggish economic growth for some time
One particularly grim data point has been the unemployment rate, which has officially hovered around 25% for several years. It climbed to 27.7% in the first quarter of 2017, making for the highest jobless rate since the first quarter of 2004. The youth unemployment rate has been suspended at an even higher figure.
The South African rand was down by 1.1% at 12.8473 per dollar at 8:16 a.m. ET.
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