South Africa’s economy contracted in the first three months of the year as mining and farming output shrunk.
Gross domestic product declined an annualized 1.2 percent in the first quarter, compared with the previous three months when it expanded by 0.4 percent, the statistics office said in a report released on Wednesday in the capital, Pretoria. The median of 21 economist estimates compiled by Bloomberg was for a 0.1 percent contraction.
Fitch Ratings Ltd. affirmed the nation’s credit rating at BBB-, the lowest investment-grade level, with a stable outlook, on Wednesday. S&P Global Ratings affirmed the nation’s credit rating at BBB-, the lowest investment-grade level, with a negative outlook, on June 3 and warned it could cut South Africa’s debt to junk if the economy doesn’t improve or if institutions are weakened by political interference.
“The fact that we have a negative outlook from S&P still means that over the next six months we would need quite a big positive surprise to South Africa in some shape or form in order to get back to form,” Gina Schoeman, an economist at Citigroup Inc. in Johannesburg, said by phone on Wednesday. “The GDP outlook has to improve and today’s numbers suggest that the consensus is probably optimistic.”
A slump in commodity prices, a drought, weak export demand and policy uncertainty exacerbated by reports that Finance Minister Pravin Gordhan may be prosecuted and court rulings against President Jacob Zuma have weighed on output.
Business confidence in Africa’s most industrialized economy fell to the lowest in almost 23 years last month and GDP will probably expand at the slowest pace since the 2009 recession this year, according to forecasts from the government, central bank and the International Monetary Fund.
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