The week ahead promises to be a busy one for SA’s economy, headlined by the 2025 budget speech and a host of key data releases.
On Tuesday, Stats SA will release the fourth-quarter quarterly labour force survey (QLFS), providing an update on SA’s unemployment rate.
Lara Hodes, economist at Investec, said she expected unemployment to have eased modestly in the fourth quarter of 2024. “However, a sustained, substantial lift in confidence and growth is required to reduce unemployment meaningfully,” she said.
According to Nedbank economists, the weak economy continued to limit job creation: “The [unemployment data] is not expected to show a significant improvement in the unemployment rate as the weak economy fails to absorb the growing labour force, and companies are sitting on excess capacity,” they said.
Looking ahead, Nedbank projected a better employment outlook in 2025. “A stable power supply, easing logistic challenges, some improvement in consumer demand, and faster reform implementation will lift business confidence and encourage the private sector to expand capacity.”
Wednesday will be a key day for economic data, with the release of both January consumer price inflation (CPI) figures and December retail trade data by Stats SA.
The Bureau for Economic Research (BER) expected January’s CPI to reflect a slight increase in inflation.
“January’s CPI will be the first print to fully reflect the changes made to the composition and weighting of the CPI basket, as well as the rebasing,” said Tracey-Lee Solomon, BER economist.
In December, consumer inflation edged up to 3% year on year, slightly above market expectations, from 2.9% in November, with month-on-month inflation accelerating by 0.1%.
Hodes projected January CPI at 3.3% year on year, with a 0.4% month-on-month increase.
“The petrol price increase of 12c/l in January will have added little to the monthly outcome. However, a more substantial increase was implemented in February (82c/l) which will add upward inflationary pressure. January is a busy survey month with a number of price adjustments made for the year,” Hodes said.
Also on Wednesday, Stats SA will release December retail trade figures, providing a final view of retail performance in the fourth quarter.
“Retail sales have had a strong quarter so far. While momentum is likely to have slowed somewhat in December, fourth-quarter performance is likely to be solid,” said Solomon from the BER.
According to Hodes, the December release will complete the picture for the trade sector’s contribution to fourth-quarter GDP.
Retail activity appears to have been supported by increased consumer spending.
“Real take-home pay increased by a notable 8.7% year on year in December, according to BankservAfrica, underpinned by lower inflation, supporting household consumption expenditure,” Hodes added.
On Wednesday afternoon finance minister Enoch Godongwana delivers his first budget speech since the formation of the government of national unity (GNU).
Expectations are for a continuation of fiscal discipline, with limited room for surprises.
FNB economists anticipated a continuation of the consolidation strategy outlined in October’s medium-term budget policy statement (MTBPS).
Johann Els, chief economist at Old Mutual, expected better revenue and expenditure outcomes than projected in the October 2024 MTBPS (a headline budget balance of minus 5.0% of GDP and a primary balance of 0.3% of GDP).
“The key theme for this year’s budget will likely be balancing expenditure and revenue in a low-growth environment, without the ability to significantly raise taxes or increase debt,” said Maarten Ackerman, chief economist at Citadel.
Both Els and Ackerman expected continued fiscal consolidation, aiming for smaller deficits, growing primary surpluses and stabilising the debt-to-GDP ratio.
Ackerman highlighted the critical need for faster policy implementation: “The policy framework is in place; what’s needed now is decisive implementation. Streamlining regulations for private sector participation in infrastructure, easing licensing constraints and providing targeted tax incentives will encourage investment and improve long-term economic stability,” he said.
With regard to expenditure, Els believed the budget will emphasise cost-cutting, particularly in public sector wages.
There is consensus that major tax increases are unlikely, but some adjustments are expected. Sin taxes on alcohol, tobacco, and sugar are likely to increase.
While Els expected no change in VAT, Ackerman suggested the government might explore “alternative revenue measures”, such as adjusting VAT structures or revising tax policies affecting high-net-worth individuals.
Regarding state-owned enterprises, Els said: “I do not expect any significant SOE [state-owned enterprise] support. There might be some reallocation from previously announced Eskom support.”
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