South Africa: GDP rebounds quarter on quarter in Q4
Economy closes 2024 with a sweeter taste in its mouth: The South African economy ended 2024 on a sweet note: GDP rebounded, expanding 0.6% on a seasonally adjusted quarter-on-quarter basis in the fourth quarter, above the upwardly revised 0.1% contraction logged in the third quarter and marking the best result since Q2 2023.
On an annual basis, economic growth improved to 0.9% in Q4 from the previous quarter’s 0.4% and marked the best result in a year. Accordingly, GDP rose 0.6% overall in 2024, inching down from 2023’s 0.7% increase and slightly undershooting market expectations.
Consumers carry the economy: The quarterly upturn largely reflected improved private consumption, which accounts for roughly two-thirds of GDP and saw a 1.0% increase in the final quarter (Q3: +0.4% s.a. qoq). Moreover, changes in inventories contributed 0.2 percentage points to GDP growth. Less positively, government spending contracted 0.8% (Q3: -0.5% s.a. qoq). Additionally, fixed investment deteriorated, contracting 0.7% in Q4 and contrasting the 0.3% increase recorded in the prior quarter.
Turning to the external sector, exports of goods and services rebounded, growing 2.1% on a seasonally adjusted quarter-on-quarter basis in the fourth quarter (Q3: -4.3% s.a. qoq), marking the best reading since Q1 2023. Similarly, imports of goods and services returned to growth, rising 2.0% in Q4 (Q3: -4.2% s.a. qoq). As such, net trade made a neutral contribution to overall GDP growth.
From a production point of view, growth was driven by the agricultural and financial sectors.
Households will continue to drive economic growth in 2025: Our Consensus is for sequential growth to slow to a near halt in Q1 2025; thereafter it should pick up some slight steam and stabilize through Q4.
Overall in 2025, our panelists see GDP growth more than doubling from 2024; faster growth of exports and private consumption growth plus a rebound in fixed investment will drive the upturn. Domestic demand, in particular, will be aided by a recovery in purchasing power as wage growth outpaces inflation, plus the trickling through to the real economy of the Central Bank (SARB)’s monetary policy loosening cycle. Downside risks include a worsening of the renewed power cuts, a steep hike in the VAT, political uncertainty, a worsening of ties with the U.S., and structural constraints like sky-high unemployment and a lack of infrastructure. The presentation of the 2025 budget on 12 March is a factor to watch.
Panelist insight: Analysts at the EIU commented on the upside risks to the outlook:
“Provided that urgent but long-delayed reforms, such as parastatal restructuring, gather momentum, instead of being derailed by the government […] we expect growth to quicken to 3% a year on average in 2026-29, boosting much-needed job creation. Fresh private investment in power supply, logistics and digital technology, alongside lower interest rates, will underpin the growth acceleration, although the economy will experience a mild slowdown in 2028 as confidence wavers in advance of the 2029 election.”