June 3 (Reuters) - Newly elected South African President Jacob Zuma delivers his first state of the nation address on Wednesday, faced with the challenge of managing a recession and appeasing unions that want more government spending.

These are some of the key issues he faces:

ECONOMY

Africa's biggest economy plunged into its first recession in 17 years in the first three months of 2009, succumbing to the global crisis in its sharpest economic contraction in a quarter of a century. Recession in developed countries has slashed demand for South Africa's minerals and manufactured goods, and first quarter data showed record falls in output in these sectors. Analysts and the treasury say recovery will depend on a revival of the world economy.

TRADE UNIONS

Powerful unions which helped Zuma's rise are pushing him to shift economic policy to the left. In one sign of labour frustrations, the metalworkers' union has threatened mass strikes over central bank monetary policies and vowed to take their battle to commercial banks. The mine workers' union backed calls for deeper interest rate cuts but said it would give the central bank time to change monetary policy before considering strikes.

Zuma is in a quagmire. He is indebted to labour and communist allies while trying to reassure foreign investors who want market-friendly policies. He has promised policy continuity. The ruling African National Congress has told unions to be patient because the government must be cautious during a recession.