South Africa’s restrictions to curb the spread of the coronavirus put the economy into its longest recession in 28 years, with gross domestic product contracting more than expected in the second quarter.
GDP shrank an annualized 51% in the period through June from the previous quarter, compared with a revised 1.8% contraction in the first three months, Statistics South Africa said Tuesday in the capital, Pretoria.
That’s the steepest decline since at least 1990 and extended the recession into a fourth quarter, the longest period of consecutive quarterly contractions since 1992.
The median estimate of 17 economists in a Bloomberg survey was for a 47.2% drop in output from the previous quarter. Year-on-year, the economy contracted 17.1%, more than the median estimate of 16%.
A strict nationwide lockdown that started on March 27 deepened the slump in an economy that’s stuck in its longest downward cycle since at least World War II.
Enforced by the police and military, people were allowed to leave their homes only to buy food, collect welfare grants and seek medical care unless they provided essential services.
While a gradual re-opening of the economy started on May 1, many companies closed down permanently or fired workers during the shutdown.
Output shrank more than the central bank’s estimate of a 40.1% annualized contraction, increasing the chances of a sixth interest-rate cut this year.
Governor Lesetja Kganyago said last month that muted inflation gives the monetary policy committee room to respond if the nature of the shock caused by the pandemic turns out to be worse than forecast.
“It adds to the case to cut by 25 basis points,” said Nazmeera Moola, head of South African investments at asset manager Ninety One Ltd. in Cape Town.
“We expect 25 either now or the following meeting, but I think this data helps to increase the case for a cut next week.”
