PRETORIA, South Africa — South Africa entered a recession for the first time in nearly two decades after the economy shrunk 6.4 percent during the first quarter of this year, government officials said Tuesday.
PRETORIA, South Africa — South Africa entered a recession for the first time in nearly two decades after the economy shrunk 6.4 percent during the first quarter of this year, government officials said Tuesday. The economy had contracted by 1.8 percent in the last quarter of 2008, and the government statistics office’s announcement that the economy is now in a recession was not unexpected. Still, experts had been predicting that GDP would drop by between 3 and 4 percent. "The release of today’s GDP figure was no surprise in its confirmation of a technical recession but takes one completely aback when the magnitude of the decline is considered," said Neren Rau, chief executive of the South African Chamber of Commerce and Industry. The country’s largest trade union federation, COSATU said the "implications are frightening" for millions of poor South Africans. Nearly 25 percent of South Africans are unemployed, and since the advent of multiparty democracy in 1994, the gap between rich and poor has grown. Demand for South African exports has declined and production has dropped with the global economic crisis, ending a decade of growth and pushing Africa’s regional powerhouse into recession for the first time in 17 years. Lesetja Kganyago, the treasury ministry’s top civil servant, said that while South Africa had weathered the global financial crisis better than other countries, the "storm had been more voracious than we thought." He said the economy would continue shrinking in the next quarter but predicted an upturn in the second half of the year. Still, this would not be enough to achieve the 1.2 percent growth projected by government earlier this year, he said. However, Kganyago said South Africa’s strong fiscal policy, a well-regulated banking sector and a budget aimed at stimulating the economy would reduce the impact of the slowdown. "The bad times may have arrived earlier than we thought, but they found us better prepared," he said. The government has embarked on a massive infrastructure spending program, and interests rates have been lowered. The Reserve Bank is expected to announce a further rate cut later this week — the fifth since December. The football World Cup to be hosted by South Africa next year also has helped cushion the blow of the global downturn, keeping the construction sector buoyed, and it also is expected to boost tourism. The main drivers behind the slowdown were a drop in manufacturing, retail and the financial sector as well as in mining. Platinum and diamond mines have shed thousands of jobs, while there also have been layoffs in auto manufacturing. On Monday, South Africa’s largest gold mining companies said production fell by 10 percent in the first quarter of 2009, compared to the previous quarter. In addition, the number of liquidations for the first four months of 2009 increased by 45.3 percent compared to the same period last year. The governing African National Congress has been accused of moving too slowly to improve the lives of the poor, and these latest figures will only increase pressure on newly elected President Jacob Zuma. The ANC launched its campaign for last month’s election with promises of heavy public spending to create jobs and improve education and health. But in an interview with The Associated Press earlier this year, Zuma cautioned that the world’s financial crisis will make those goals hard to reach. ______ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
About Post Author
