South Africa’s economy is officially in a technical recession following a 1.4% contraction in the 2019 fourth quarter gross domestic product (GDP).
This is according to Statistician General Risenga Maluleke, who released the latest GDP figures in Pretoria on Tuesday.
The fourth quarter contraction follows a 0.8% contraction in the third quarter of 2019. A technical recession occurs when the economy records negative growth for two consecutive quarters.
Transport, trade main drags
This is the third time South Africa’s economy has been in a technical recession since 1994, Maluleke said. The second was in 2018.
The main drags on overall economic activity in the fourth quarter were transport and communication industry, which slumped by 7.2%, and trade industry, which declined by 3.8%.
Manufacturing also declined by 1.8%. Construction recorded its sixth consecutive quarter of decline while agriculture also contracted for the fourth consecutive quarter.
On the positive side, mining grew by 1.8%, driven largely by platinum group metals, iron ore and gold. The finance industry also grew by 2.7%.
SA’s 2019 GDP growth lowest since 2009
In overall terms, South Africa’s GDP grew by a paltry 0.2% in 2019. This is the lowest since 2009 when the economy contracted by 1.5% at the height of the global financial crisis.
Maluleke said, “Agriculture was the main drag on growth in 2019, followed by construction, mining and manufacturing. Finance and government were the main positive contributors to growth.”
The fourth quarter GDP figures are worse than what economists had predicted. According to Bloomberg, the median prediction among 12 polled economists was a contraction of 0.2%.
The figures are also likely to pile more pressure on President Cyril Ramaphosa, who has struggled to kickstart the economy since taking office in February 2018.
Growth forecasts for 2020 are also low. In his budget speech in February, Finance Minister Tito Mboweni put forward a forecast of 0.9%.
However, Moody’s ratings agency’s forecast is just 0.7%, while the International Monetary Fund and the World Bank also have their forecasts at less than 1%.
Reasons put forward include load shedding, rising debt levels, low demand in the economy, and slow pace of structural reforms.
Read detailed GDP figures from Stats SA here.