South Africa’s economy unexpectedly contracted by 0.3% in the third quarter of 2024, despite steady electricity supply during the period, dragged down by a decline in agricultural output.
South Africa’s economy unexpectedly contracted by 0.3% in the third quarter of 2024, despite steady electricity supply during the period, dragged down by a decline in agricultural output.
According to data released by Statistics South Africa (Stats SA) on Tuesday, four out of 10 industries fell during the quarter, including agriculture, forestry and fishing, which decreased by 28.8%. Transport, trade and government services also contributed to the dip.
The weaker GDP data comes after the economy grew by a revised 0.3% in the second quarter as the absence of load-shedding created a more favourable environment for producers and lower inflation, especially on essentials such as food and fuel, supported consumers’ purchasing power and real incomes.
However, even during the second quarter economists viewed agriculture as the wildcard, saying lower summer crops would be a dampener on growth. Agriculture recorded its second consecutive decline in the third quarter.
The agriculture industry experienced a tough quarter as drought plagued the production of field crops such as maize, soya beans, wheat and sunflower. Adverse weather conditions also hindered the production of subtropical fruits, deciduous fruits and vegetables in parts of the country, Statistics SA noted.
Tuesday’s data showed that on the expenditure (demand) side of the economy, exports decreased by 3.7%, the largest decline in three years. The slump was mainly the result of weaker trade in pearls, precious and semi-precious stones and precious metals; vehicles and transport equipment (excluding large aircraft); chemical products; base metals and articles of base metals; and machinery and electrical equipment.
The Bureau for Economic Research had predicted third quarter growth of between 0.2% and 0.4%, while noting lingering uncertainty about the volatile agriculture sector and the difficult-to-measure tertiary sector.
Nedbank economists also forecast growth of 0.5% on the back of a slight uptick in economic activity over the period which reflects better operating conditions and firmer domestic demand brought about by falling inflation.