Government in for tough ride as SA economy contracts on diminished output

By Gordon Bell and Adelaide Changole(Bloomberg) – South Africa's economy contracted for a second quarter this year in the three months through September as farming, mining and factory output slumped.The rand extended its decline against the dollar, weakening 0.7% to R14.6472 per dollar by 11:33 in Johannesburg.Gross domestic product shrank an annualised 0.6%, compared with a revised 3.2% expansion in the second quarter, Statistics South Africa said on Tuesday. The median estimate of 14 economists in a Bloomberg survey was for no growth. The economy expanded 0.1% from a year earlier..Key insightsThe contraction means full-year economic growth, which hasn't exceeded 2% since 2013, could be even lower than the 0.5% projected by the Treasury in October. That will add to the woes of an economy buckling under failing state companies and ballooning debt that's been sapping business and consumer confidence.The continued lack of growth will weigh on the government's revenue collection and make it even more difficult to lower an employment rate that's close to 30% and that's seen as one of the biggest obstacles to reducing poverty in one of the world's most unequal nations.Credit ratings companies have been flagging deteriorating debt metrics due to low GDP growth and high budget deficits as a key risk. Tuesday's GDP data makes it even more likely that South Africa will lose its last remaining investment-grade assessment from Moody's Investors Service.

Government in for tough ride as SA economy contracts on diminished output

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