Statistician-general Risenga Maluleke announces contractions in the first and second quarters of this year.
CFOs and their teams will need to brace themselves for tough times as a contraction in the local economy signals business challenges as the rand falls and imports are likely to become more expensive.
Despite many economists projecting South Africa would narrowly miss falling into a recession, Statistics SA announced on Tuesday that the “two consecutive quarters of declining GDP” definition requirements had been met.
“We are in recession. We reported a contraction in the first quarter even with revisions and now in the second quarter with a fall of 0.7%, we are in recession,” statistician-general Risenga Maluleke said in Pretoria on Tuesday.?
This, South Africa’s first recession since the global financial crisis, saw the first quarter’s revised growth contraction of 2.6 percnet being followed by a contraction of 0.7 percent in the second quarter.
The rand weakened sharply following the announcement, from R14.87/$ to R15.25/$. It has since recovered back to under R15.20/$.
The biggest contributors to the country’s declining growth were agriculture, forestry and fisheries, which decreased by 29.2 percent, and the transport, storage and communications industry, which decreased by 4.9 percent.
There were, however, increases in mining, finance, real estate and business services. Mining increased by 4.9%, and finance, real estate and business services increased by 1.9%.