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By Kopano Gumbi
PRETORIA (Reuters) -South Africa's economy unexpectedly shrank in the third quarter of this year as a drought caused a big drop in agricultural production, but analysts said they expected a return to modest growth in the coming quarters.
Data from Statistics South Africa showed gross domestic product (GDP) fell 0.3% in seasonally-adjusted quarter-on-quarter terms, whereas economists polled by Reuters had predicted an expansion of 0.5%.
Agriculture, forestry and fishing contracted 28.8% quarter on quarter, primarily due to field crops.
"Maize and soy account for about 70% of field crops and we know they have had a difficult quarter due to drought," statistician Joe de Beer told a news conference.
Southern Africa has faced its worst drought in decades this year, hurting economic output across the region.
De Beer said the contraction in agriculture had pulled economic growth into negative territory.
"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 said.
Capital Economics analyst David Omojomolo said in a research note that the downside surprise could encourage the South African Reserve Bank to continue with its monetary easing cycle.
Razia Khan, chief economist for Africa and the Middle East at Standard Chartered, said the outlook for Africa's most industrialised economy remained positive despite the third-quarter contraction.
"This does not alter our big picture outlook," she said, highlighting that mining, manufacturing and construction all grew in the latest quarter.
Of the 10 industries tracked by Stats SA, only four contracted, a presentation by the agency showed.
South Africa's third-quarter GDP grew 0.3% on a year-on-year basis, also worse than the 1.2% growth predicted by economists.
(Reporting by Kopano GumbiAdditional reporting by Tannur AndersEditing by Alexander Winning and Sharon Singleton)
