The South African economy has gone into recession for the first time since 1992, following a sharp slowdown in the manufacturing and mining sectors.
Kganyago says expects another GDP fall in Q2
SACCI taken aback by magnitude of GDP decline
GDP Drops By 6.4 Percent in First Quarter
Read the Stats SA report
Economists Warn of Recession Shock
Africa's biggest economy contracted at an annualised rate of 6.4% between January and March, compared with the same period a year earlier.
It was the biggest decline since 1984 and followed an annualised 1.8% fall in the previous three months.
The construction sector, however, was boosted by the upcoming World Cup.
South Africa is benefiting from a huge programme of government investment ahead of the football tournament in 2010.
Rate cut expected
A recession is generally defined as being two quarters of negative growth.
"It's far worse than we expected," said Elna Moolman, economist at Barnard Jacobs Mellet.
"It confirms the recession in the economy and certainly increases concerns about overall growth for 2009, given such a bad start for the year."
The Reserve Bank of South Africa is due to announce its latest decision on interest rates on Thursday.
It is now expected to cut rates by a full percentage point from the current level of 8.5%.
It has started holding its meetings every month instead of every other month to allow it to act more quickly.
The central bank has reduced rates from a level of 12% in December.
Recovery predicted
Statistics South Africa, which calculated the latest figures, said the slowdown in manufacturing and the mining and quarrying sector had been primarily responsible for the contraction.
Mining firms have been hit by falling demand for their products as a result of the global economic slowdown.
The government has predicted that there will be another quarter of negative growth to come before the economy recovers.
"Looking ahead, we expect another quarterly contraction for the second quarter, but this is expected to be smaller," said National Treasury Director General Lesetja Kganyago.
The weak economy presents particular problems for the new President Jacob Zuma, who has promised to create jobs and fight poverty.
"It's easy to budget and make plans in a boom phase," said Johan Rossouw, chief economist at Vector Securities and Derivatives.
"Now it's a different kettle of fish. It is definitely going to make things tougher."
'Blame ANC for recession'
The opposition Democratic Alliance on Tuesday blamed the ANC government for South Africa's first recession since the end of apartheid.
"This not only confirms that our economy is now in a full-blown recession, but also that the ANC government has not taken the necessary steps to ensure that we survive the worst effects of the global economic crisis," DA MP Dion George said in a statement.
The country's growth rate contracted by 6.4 percent in the first quarter of 2009, compared to the fourth quarter of 2008, when it shrunk by 1.8 percent.
The two consecutive quarters of negative growth put South Africa in its first recession in 17 years.
"In light of this larger than expected contraction of the economy it is now more clear than ever that government, labour and business need to work together to find solutions to the economy's woes," said George.
"These include lowering wage expectations, targeted assistance to certain labour-intensive industries to ensure that we retain much-needed jobs, and government needs to 'unpick' the numerous constraints that stifle business productivity, expansion and job creation."
He called on the Reserve Bank to cut interest rates by at least 100 basis points as "a much-needed measure to stimulate domestic demand, and get the economy going again".
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