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.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects South African GDP projections for the next ten years from a panel of 28 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for South African GDP.

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