South African economy shrinks in second quarter, dragged down by Iran war

PRETORIA, Sept 8 (Reuters) - South Africa's economy shrank for the first time in almost two years in ‌the second quarter of 2026, official data showed on Tuesday, ‌as the Iran war depressed domestic demand and the mining and manufacturing sectors performed ​poorly.

• Gross domestic product contracted 0.2% on a seasonally adjusted quarter-on-quarter basis. Economists polled by Reuters had forecast a 0.1% contraction.

• The contraction was mainly driven by output falls in the mining (-3.0%), manufacturing (-1.8%) and ‌trade (-1.9%) sectors.

• "The situation in ⁠the Middle East definitely reflected in these numbers. The question we don't yet know is how long this ⁠will persist, especially for manufacturing," said Joe de Beer, head of economic statistics at Statistics South Africa.

• He added third-quarter data would determine ​whether 2026's ​annual growth rate could beat ​economists' current projections of 1.2% ‌to 1.5%.

• Before the Iran war started in late February, the finance ministry was targeting 1.6% growth this year, but domestic fuel price hikes have since darkened the outlook.

• "Higher fuel prices clearly hit demand in South Africa really hard," Razia Khan, chief Africa economist at ‌Standard Chartered, said in emailed comments.

• ​Household spending is a key driver of ​the South African economy ​and remained in positive territory in the second quarter, ‌though fixed investments fell again.

• ​Looking ahead to ​the third quarter, North-West University Business School economist Prof Raymond Parsons said: "The evidence points to an economy in which recovery has ​been interrupted and ‌delayed, rather than definitively derailed."

(Reporting by Kopano Gumbi; Addditional reporting ​by Sfundo Parakozov, Nilutpal Timsina and Anathi Madubela; Editing ​by Alexander Winning and Hugh Lawson)