South African economy unexpectedly contracts in first quarter

BREAKING NEWSJune 4, 2024 at 9:33 PM UTC

TLDR

South Africa's economy contracted by 0.1% in the first quarter of 2024, falling short of the expected growth.
The decline was driven by downturns in the mining and construction sectors, impacting overall economic performance.
Despite a 0.5% year-on-year growth, below the forecasted 0.6%, the economy faces challenges requiring effective policy interventions for growth stimulation.

South Africa’s economy recorded a slight contraction in the first quarter of 2024, as revealed by statistics agency data on Tuesday.

The GDP shrank by 0.1% quarter-on-quarter in seasonally-adjusted terms, contrary to economists’ expectations of a 0.1% growth. This decline was primarily driven by a downturn in the mining and construction sectors.

On a year-on-year basis, the economy grew by 0.5%, slightly below the 0.6% growth forecasted by economists. This underperformance highlights ongoing challenges in key sectors and underscores the need for effective policy measures to stimulate economic growth.

Key Takeaways

South Africa's economy has faced prolonged stagnation over the past decade, plagued by rolling power cuts, high unemployment, and inefficiencies in ports and rail systems, which have significantly hindered growth. In the first quarter of 2024, six out of ten industries tracked by Statistics South Africa experienced contractions. The construction and mining sectors were the hardest hit, with declines of 3.1% and 2.3%, respectively. Additionally, consumer spending weakened, as final consumption expenditure fell by 0.3%. Despite this, the South African central bank projects a GDP growth of 1.2% for the year, expressing optimism for an improved performance in the second quarter.

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