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South Africa: Economy swings to contraction in Q2

August 25, 2015

In the second quarter, the economy contracted 1.3% over the previous quarter at a seasonally adjusted annualized rate (SAAR). The reading contrasted the 1.3% expansion seen in the first quarter and marked the lowest reading in over a year. Q2’s contraction also contrasted the 0.5% expansion the markets had expected. Moreover, in annual terms, GDP expanded 1.2%, which came in below the 2.1% expansion recorded in the previous quarter.

Q2’s slowdown came on the back of a contraction in mining and quarrying, which dropped 6.8% (Q1: +10.2% quarter-on-quarter SAAR). In addition, manufacturing contracted 6.3%, which was a deterioration over the 2.4% drop seen in the previous quarter. The construction sector also decelerated over the previous quarter and grew a weak 0.2%, which was down from the 0.8% increase observed in Q1. In Q2, the agriculture, forestry and fishing sector fell 17.4%, thus marking a deterioration over the 16.6% contraction tallied in Q1.

Against the backdrop of a weak economy, in delivering the budget for 2015, the government revised downward its growth forecast. The government lowered its GDP forecast for this year to 2.0% from 2.5% previously forecasted. For next year, the government expects growth of 2.4%. The Central Bank expects the economy to expand 2.8% in 2015. FocusEconomics panelists project the economy to grow 1.5% in 2015, which is down 0.2 percentage points from last month’s estimate. For 2016, panelists expect the economy to grow 2.5%.

Author:, Senior Economist

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South Africa GDP Chart

SouthAfrica GDP Q215

Note: Year-on-year changes of GDP in %
Source: Statistics South Africa (Stat SA) and FocusEconomics Consensus Forecast.

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