SA’s economic outlook has brightened, with milestones igniting hopes of stability and growth, paving the way for an optimistic 2025, economists say.
Eskom’s more stable power supply and Transnet’s efforts to enhance transport logistics were expected to drive higher business confidence and investment. This provided a GDP backdrop that is more favourable than it has been in years, said Johann Els, chief economist at Old Mutual.
“Reduced structural constraints, coupled with lower inflation and interest rates, could push GDP growth above 2% in 2025,” he said.
Last week, Eskom marked 300 consecutive days without load-shedding.
“These developments are expected to boost consumer and business confidence, driving stronger consumer spending and business investment. Real income growth, supported by employment gains and subdued inflation, will further bolster consumer expenditure. In this more favourable environment, private sector investment and labour hiring are also likely to accelerate,” Els said.
Stats SA released its data on November retail sales and mining activity as well as December inflation last week, ahead of the fourth quarter GDP data set to be released in March.
The inflation data brought good news, with consumer price inflation remaining anchored at 3%, the lower end of the Reserve Bank’s 3%-6% target range. Analysts expect this to pave the way for a 25 basis point rate cut in the monetary policy committee meeting this week.
Investec economist Lara Hodes said that subdued inflation, particularly in housing and food, had supported real disposable income growth.
Unsurprisingly, sales surged in November, rising 7.7% year on year, outpacing market expectations. This marked the strongest retail sales growth in 14 years, excluding pandemic-era disruptions and the July 2021 riots.
Reduced structural constraints, coupled with lower inflation and interest rates, could push GDP growth above 2% in 2025
— Johann Els, Old Mutual
The growth was driven by robust performance in general dealers (11.9%), textiles and clothing (9.5%) and household appliances (9.4%), bolstered by the two-pot pension withdrawal scheme and Black Friday sales.
“These numbers bode well for [fourth quarter] GDP growth,” FNB senior economist Siphamandla Mkhwanazi said, noting declining fuel costs as another driver.
Mining, traditionally a big contributor to GDP, is on track to record its first calendar year growth since 2021.
Yet it showed a mixed performance in November, with the overall mineral output falling 0.9% year on year, ending three months of consecutive growth.
But despite monthly declines in October and November, seasonally adjusted mining production for the three months to end-November was up 4%, with the Minerals Council SA predicting a positive fourth quarter contribution to GDP.
While these statistics have not changed the GDP growth forecasts for the fourth quarter or the full-year of 2024, the economists interviewed by Business Day said they set the stage for a brighter 2025.
Considering much of the fourth quarter’s GDP data is yet to be released, Els forecast a 0.6% growth rate for the quarter. His estimate for real GDP growth in 2024 is 0.5%, factoring in the incomplete fourth quarter data and assuming no revisions to the third quarter GDP figures.
“A big uncertainty for GDP growth is agriculture,” Absa economists said, noting the sector’s volatility after a sharp 28.8% contraction in the third quarter.
This week's data came in largely with expectations and does not alter our view that the consumer probably did relatively well in the fourth quarter but that the industrial side of the economy was still under a bit more pressure
— Lisette IJssel de Schepper, chief economist at the BER
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), said that the overall real GDP forecast for 2024 and beyond “is complicated by the 2024 [third quarter] figure, which, at minus 0.3% quarter on quarter, came out significantly weaker than expected,” also pointing to agriculture, worsened by Stats SA’s overstatement.
“Credible research from the Bureau for Food and Agricultural Policy has shown that the 2024 [first quarter] to 2024 [third quarter] contraction as published by Stats SA is a severe overstatement of what actually transpired in the sector, and indications are that a significant revision will be made to the agriculture data which should result in a revision to [third quarter’s] overall GDP print.
“This will have implications for the starting point of our forecast (as we know the [third quarter] print is wrong), but we have no sense of the extent of the revision or how this will be accounted for in the GDP calculation from the expenditure side on which our forecast is based.”
She said that assuming no changes were made to third quarter figures, just more than 2% quarter-on-quarter growth in the fourth quarter was needed to get to what would be a plausible full-year print of about 0.9% growth — “but a revision to [the third quarter] is likely which would then result in a lower quarter-on-quarter figure.
“This week’s data came in largely within expectations and does not alter our view that the consumer probably did relatively well in the fourth quarter but that the industrial side of the economy was still under a bit more pressure,” IJssel de Schepper said.
She therefore forecast “about 0.9%” for the full-year, but with the assumption that the third quarter would be revised to some extent.
Absa’s initial fourth quarter GDP tracking estimate also points to a 0.9% quarter-on-quarter seasonally adjusted growth rate, reflecting strong consumer activity but muted momentum in goods producing sectors.
This is slightly lower than the January Bloomberg consensus of 1.2%.
Hodes projected 1.8% quarter-on-quarter seasonally adjusted growth for the final quarter of 2024 and 0.8% for the full year.
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