The number, significantly worse than expected, will back the case for another 100 basis point cut in the repo rate on Thursday.
Africa’s biggest economy has been badly hit by the global economic woes, with recession in developed countries slashing demand for manufacturing and mining products.
On an unadjusted basis, South Africa’s economy shrank by 1.3 percent compared to the first quarter of 2008, Statistics South Africa said, against forecasts of a 0.2 percent fall and pointing to a full year contraction.
"The decline in economic activity is widespread across the economy," said Joe de Beer, Executive Manager for National Accounts at Stats S.A.
A Reuters poll of economists last week forecast the economy shrinking by an annualised 3.9 percent in the first quarter.
"It’s bigger than what everybody had expected. This will definitely support our expectations for a 100 basis points interest rate cut and anything past that will be dependent on inflation," said Christie Viljoen, economist at NKC Consulting.
"Although the central bank is kept busy with inflation, this economic weakening cannot be ignored."
The rand currency extended its losses against the dollar to over 1.8 percent after the data, and traded at 8.3895 at 1014 GMT after touching 8.3950 earlier, compared with 8.3405 before release of the figures at 0930 GMT.
Stats S.A. said output for manufacturing, which makes up about 17 percent of the economy, fell by 22.1 percent, the biggest decline since the statistics agency started keeping quarterly records in 1960, while mining shrank by 32.8 percent, also the biggest fall on record.
Construction, buoyed by a massive government spending programme on roads, power and stadiums for the 2010 soccer world cup, was one of the only sectors to grow, although expansion slowed to 9.4 percent.
The data also showed that the finance sector, for long one of the main contributors to growth, contracted by 2.3 percent, the biggest fall since 1990.