South Africa’s surprise decline in GDP for the third quarter of the year has set full-year projections back, with economists no longer optimistic that the country could cross the 1% mark.<\/p>\n\n\n\n
This has seen forecasts pull back from the more positive growth trend before the GDP numbers came in, falling back towards the same\u2014or worse\u2014levels than in the 0.7% seen in 2023.<\/p>\n\n\n\n
According to Bureau for Economic Research (BER) chief economist Lisette IJssel de Schepper, South Africa is likely to scrape by with 0.8% GDP growth in 2024<\/strong> after the latest results.<\/p>\n\n\n\n She described the Q3 GDP figures as “disappointing”, and dulling the optimistic tone many had taken after the May 2024 elections and the end of load shedding.<\/p>\n\n\n\n “A huge drop in the agricultural component of GDP meant that the economy contracted on a quarterly basis. This sets the entire 2024 back and means that the economy will be lucky to see a marginal acceleration from the 0.7% growth recorded in 2023,” she said.<\/p>\n\n\n\n However, while many were shocked by the lower GDP print, IJssel de Schepper said that it wasn’t all that surprising.<\/p>\n\n\n\n “Even without agriculture, GDP growth would have been sluggish \u2013 we would have been glad to hit 1% this year,” she said.<\/p>\n\n\n\n “The manufacturing sector has been hit with shock after shock over the last couple of years, and a few months of no load-shedding and optimism around the GNU is not enough to turn the battered sector around.”<\/p>\n\n\n\n The same holds for the broader industrial production sector in South Africa, she said, with the logistics issues still hurting. .<\/p>\n\n\n\n More positively, consumers are finally getting some welcome relief; however, this is happening very late in the year, meaning it won’t impact the final GDP figure too much.<\/p>\n\n\n\n Slightly lower interest rates and significantly lower inflation are welcome, but do not mean that shopping basket are suddenly less expensive, she said.<\/p>\n\n\n\n There has also been a near-term boost from two-pot retirement withdrawals, which will also alleviate some pressure, “but we will need to see sustained real income and job growth for there to be a meaningful and sustained difference in spending,” she said.<\/p>\n\n\n\n “Indeed, the fact that so many consumers are withdrawing so much just underscores the underlying weakness of the consumer.<\/p>\n\n\n\n “The point is that the lingering weakness in 2024 is not a surprise, but we remain more hopeful about 2025 as long as we continue to see a commitment to further structural reform\u2014and (US president-elect Donald) Trump does not destroy the global economy.” <\/p>\n\n\n\n IJssel de Schepper is not alone in this assessment<\/p>\n\n\n\n Economists at Nedbank have taken an even dimmer view, projecting GDP growth of only 0.5% in 2024<\/strong>, before recovering to 1.5% in 2025.<\/p>\n\n\n\n While the group anticipates a recovery in the fourth quarter of 2024, the Q3 data shows that the economy is far from being out of the woods.<\/p>\n\n\n\n “On the upside, the most significant weakness came from agriculture. Excluding agriculture, the economy grew by 0.4% qoq. Consequently, we still expect the economy to recover in Q4 before strengthening and broadening throughout 2025,” it said.<\/p>\n\n\n\n The boost will likely come from continued improvements in consumer demand as inflation remains subdued and interest rates start to decline more meaningfully, bolstering real incomes and lowering borrowing costs. <\/p>\n\n\n\n An added boost could also come from households’ access to contractional savings enabled by the two pot retirement system. <\/p>\n\n\n\n “However, slower government spending, a modest fixed investment recovery, and the persistent drag from net exports will likely contain the boost from more robust consumer spending to GDP over Q4,” the bank said.<\/p>\n\n\n\n “Altogether, we forecast GDP growth of around 0.5% in 2024, followed by faster growth of 1.5% and 1.8% in 2025 and 2026, respectively.”<\/p>\n\n\n\n Other economists are still cautiously optimistic, however, with Sanisha Packirisamy, Chief Economist at Momentum Investments, still projecting growth at 1%.<\/p>\n\n\n\n “We still expect economic growth to recover from 0.7% in 2023 but remain lacklustre at around 1% in 2024<\/strong>\u2014with the potential of a downside surprise\u2014before rebounding to an expected 1.8% in 2025,\u201d she said.<\/p>\n\n\n\n In its October update, the IMF said it expects\u00a0South Africa\u2019s GDP growth to\u00a0be stronger at 1.1%\u00a0in 2024<\/strong>, with 2025\u2019s projection also boosting\u00a00.3 points to 1.5%.<\/p>\n\n\n\n The South African Reserve Bank’s last projection (at its November MPC meeting) saw growth for 2024 at 1.1%<\/strong>, in line with the IMF. 2025 is projected at 1.7% and 2026 is seen at 1.8%.<\/p>\n\n\n\n
\n\n\n\n