South Africa’s economy contracted by 1.2 percent at the start of the year in a surprise sharp downturn for Africa’s most industrialized nation, official statistics showed.
The country has been struggling with record unemployment, drought and political scandals, but most economists had forecast only a marginal contraction.
“GDP growth rate was -1.2 percent in the first quarter of 2016,” Statistics South Africa said in a statement.
“The main contributors to the negative GDP growth rate were the mining and quarrying industry and the transport, storage and communication industry.”
GDP dipped by 0.2 percent on a year-on-year basis, as South Africa teeters on the brink of its first recession since 2009.
The central bank and the International Monetary Fund (IMF) forecast GDP growth in 2016 at a meagre 0.6 percent, while Nedbank, one of the country’s four leading banks, expects it to be only 0.2 percent.
South Africa’s sluggish economy last week avoided a credit rating downgrade to junk status by S&P Global-Ratings. Fitch Ratings also kept its rating at the lowest investment-grade level.
As the country suffers a major decrease in investor confidence, a downgrade to sub-investment grade for South Africa would likely prompt selling by some funds that do not hold junk-rated securities.
Mining and quarrying fell by 18.1 percent in the last quarter, due to lower production of platinum and iron ore.
South Africa, which expanded by an average 5.0 percent between 2004 and 2007, has also been hit by weak international commodity prices and the economic slowdown in China.