{"id":785331,"date":"2024-08-02T11:06:26","date_gmt":"2024-08-02T09:06:26","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=785331"},"modified":"2024-08-05T10:51:13","modified_gmt":"2024-08-05T08:51:13","slug":"the-bright-turn-for-south-africa-is-coming","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/785331\/the-bright-turn-for-south-africa-is-coming\/","title":{"rendered":"The bright turn for South Africa is coming"},"content":{"rendered":"\n

South Africa’s economy is expected to see its strongest growth in a decade in 2025, as reforms are implemented and interest rates are cut.<\/p>\n\n\n\n

Speaking at a Bureau For Economic Research (BER) conference, the director-general of the National Treasury, Duncan Pieterse, repeated the government’s commitment to stabilising debt and debt service costs. <\/p>\n\n\n\n

“Importantly, it seems that the push to address the ‘binding constraints’ to growth is gaining momentum,” said the BER. <\/p>\n\n\n\n

The Stellenbosch-based economic research hub is highly optimistic for South Africa’s economy in the near term. <\/p>\n\n\n\n

Although South Africa’s economy is only expected to grow by roughly 1.0% in 2024, the BER believes that GDP will grow by 2.2% in 2025. <\/p>\n\n\n\n

This is due to the anticipated easing of the country’s logistics woes and the implementation of key economic reforms by the new Government of National Unity (GNU). <\/p>\n\n\n\n

After losing its majority in parliament for the first time in the democratic era, the ANC formed a GNU with ten other parties, most notably the DA and IFP. The new government has committed to accelerating reforms to boost economic growth, particularly the nation’s poor-performing rail network.<\/p>\n\n\n\n

Shannon Bold, senior economist for macroeconomic modelling and forecasting at the BER, said that logistics disruption should be less constraining in 2025, while consumer and business sentiment is expected to improve. <\/p>\n\n\n\n

The BER’s forecast for 2025 is far higher than the South African Reserve Bank’s (SARB’s) 1.5% growth estimate for 2025 and the International Monetary Fund’s 1.2%. <\/p>\n\n\n\n

2.2% growth would be the fastest growth rate in over a decade when excluding 2021, which saw a rebound from the pandemic-induced recession. <\/p>\n\n\n\n

South Africa’s GDP grew by 0.6% in 2023, which seemed unlikely at the start of the year amid heightened load shedding. <\/p>\n\n\n\n

However, as South Africa’s population grows by roughly 1.5%annually, the country will likely hit a per-capita recession.<\/p>\n\n\n

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The BER said that lower inflation, stronger currency,y and interest rate cuts should also lift growth in 2025. <\/p>\n\n\n\n

Inflation is expected to drop below the SARB’s target of 4.5% in Q4 2024, boosting the probability of a central bank cutting the repo rate from its 15-year high of 8.25%. <\/p>\n\n\n\n

The rand has benefitted from the formation of the GNU. <\/p>\n\n\n\n

Furthermore, the US Federal Reserve is expected to start cutting its interest rates when it meets in September amid a decline in US consumer inflation figures. <\/p>\n\n\n\n

Thus, the BER, along with Bank of America (BofA) and Nedbank, expects the SARB to cut interest rates by 25 basis points when it meets in September. <\/p>\n\n\n\n

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Interest rate cuts in South Africa: All signs point to one month<\/a><\/blockquote>