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South Africa's economy shrinks for the first time in five years

by , 27 May 2014

Earlier today, Stats SA released its official figures for gross domestic product (GDP) covering the first quarter of 2014. The data showed that for the first time since 2009, the economy contracted. The major cause of the fall is the lengthy strike in the platinum sector. Let's take a closer look at the data…


The platinum strike hit GDP hard

From January to March, GDP fell 0.6%, says BDLive. The contributing factors to this decline were the platinum sector strike and poor manufacturing output.

For the final quarter of 2013, the “economy had expanded 3.8%,” notes Mining Weekly.

This fall is the first time the economy’s contracted “since the second quarter of 2009,” adds BDLive.

After release of the news, the “rand fell 1% against the dollar… to its softest level in nearly a week,” reports Fin24. The fall “undermines the case for more interest rate hikes this year”. Now the worry is of another recession.

Poor manufacturing output also put pressure on GDP

The news makes the new finance minister Nhlanhla Nene’s job even more taxing two days in, says IOL. The platinum sector strike led to a nearly 25% drop in the mining sector’s economic activity. Manufacturing also dipped 4.4%.

The fall in mining output is “the biggest quarterly contraction since 1967,” adds Mining Weekly.

In response to the GDP figures, the CEO of the South African Chamber of Commerce and Industry (SACCI), Neren Rau, said it raises some questions about the country’s “labour relations framework,” reports the SABC. He said “South Africa urgently requires open debate on ending and preventing similar debilitating strikes”.

Considering the platinum sector strike is continuing and we’re two months into the second quarter, GDP isn’t likely to improve.

Let’s see what happens in a few months’ time when the second quarter GDP figures come out.
 
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South Africa's economy shrinks for the first time in five years
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