S.Africa’s economy shrinks in Q1 as farming slumps, rand falls

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PRETORIA (Reuters) – South Africa’s economy contracted more than expected in the first quarter led by a slowdown in agriculture and mining, sending the rand lower as investors were given a reminder of the fragility of last year’s economic rebound.

A hawker prepares a cob of corn at his makeshift shop in Soweto, South Africa, January 27, 2016. REUTERS/Siphiwe Sibeko/File Photo

Gross domestic product (GDP) contracted by 2.2 percent in the first three months of 2018 after expanding by 3.1 percent in the final quarter of last year, Statistics South Africa said on Tuesday.

This was the largest quarter-on-quarter decline since the first quarter of 2009, when the economy contracted 6.1 percent, the agency said.

The rand weakened nearly one percent.

South Africa’s economy has barely grown in the past decade with fiscal missteps and corruption contributing to weak business and consumer confidence.

Investor sentiment picked up after new President Cyril Ramaphosa pledged to clean up poor governance that set in under former President Jacob Zuma, who was forced out by the ruling party in February.

Economists polled by Reuters had expected a quarter-on-quarter GDP contraction of 0.5 percent.

The agriculture sector shrank 24.2 percent in the quarter due to poor horticulture output, followed by mining which fell 9.9 percent and manufacturing was down 6.4 percent.

GDP rose 0.8 percent on an unadjusted year-on-year basis in the first quarter, compared with a 1.5 percent expansion in the previous three months, the agency said.

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