The South African economy has unexpectedly shrunk as a result of drought conditions

Due to a significant decline in agricultural output brought on by the drought, South Africa’s GDP unexpectedly contracted in the third quarter of this year. However, analysts predicted that the economy will rise modestly again in the upcoming quarters.

The GDP shrank 0.3% in seasonally adjusted quarter-over-quarter terms, according to Statistics South Africa data, whereas Reuters polled economists projected a 0.5% rise (ZAGDPN=ECI), opens new tab.

Field crops were the main cause of the 28.8% quarter-over-quarter decline in agriculture, forestry, and fishery.

At a press briefing, statistician Joe de Beer stated, “We know they have had a difficult quarter due to drought, and maize and soy account for about 70% of field crops.”

This year, Southern Africa saw its worst drought in decades, which negatively impacted regional economic output.

According to De Beer, economic growth has sunk into negative territory as a result of the agricultural decline.

“If we for a moment ignore the agricultural contraction… then you end up with a GDP figure of 0.4%, which is very much closer to what we’ve seen from consensus estimates,” he stated.

In a research note, Capital Economics analyst David Omojomolo suggested that the South African Reserve Bank would decide to stick with its monetary easing cycle as a result of the downside surprise.

Despite the third-quarter contraction, Standard Chartered’s head economist for Africa and the Middle East, Razia Khan, said the future for Africa’s most developed economy was still favorable.

She stated, “This does not alter our big picture outlook,” emphasizing that the most recent quarter saw growth in manufacturing, construction, and mining.

According to a Stats SA presentation, only four of the ten industries it tracks had contracts.

In comparison to the 1.2% growth forecasted by economists (ZAGDPY=ECI), South Africa’s third-quarter GDP expanded by 0.3% year over year.