In 2024, South Africa’s GDP grew only 0.6%, the slowest rate in four years due to logistical constraints, weak consumer spending, and poor fixed investment. Despite a slight recovery in Q4, growth remains below expectations. Experts project a possible acceleration in 2025 driven by increased consumption and investment reforms.
In 2024, South Africa’s economy recorded its slowest growth in four years, expanding by only 0.6%. This slight increase is attributed to various factors including logistical constraints, reduced consumer spending, adverse weather conditions, and insufficient fixed investment. Notably, the growth rate fell from 0.7% in 2023, marking the poorest performance since the pandemic’s peak in 2020, when restrictions severely impacted economic activities.
The statistics, released by Statistics South Africa, reveal that only three out of ten sectors, including finance and personal services, contributed positively to growth. Finance grew by 3.5%, personal services by 1.7%, and the utility sector, particularly electricity and water, also saw improvements. This contrasts sharply with sectors like agriculture and trade, which contracted by 8% and 1.4% respectively, while gross fixed capital formation declined by 3.7%, representing the worst performance since the pandemic.
Bloomberg Economics experts predict a likely acceleration in economic growth in 2025, driven mainly by increased consumer demand. The anticipated rise in consumption is expected to spur investment and industrial activity, particularly aided by ongoing reforms in the energy and rail sectors. The resurgence in economic activity is seen as hopeful, despite underwhelming figures for 2024.
The fourth quarter of 2024 offered slightly better news, as GDP expanded by 0.6% after a contraction in the previous quarter. Growth in this period was primarily driven by significant increases in agriculture and finance. Notably, household consumption expenditure rose by 1%, attributable to low inflation and reduced interest rates in the latter half of the year, as well as the introduction of a two-pot pension system that enhanced access to retirement funds for consumers.
In summary, South Africa’s economic growth in 2024 was severely hindered by multiple factors including poor investment, weak consumer spending, drought, and logistical issues. Despite a slight uptick in the fourth quarter, overall growth did not meet expectations. However, forecasts for 2025 remain cautiously optimistic, with predictions of increased consumption and potential reforms likely to stimulate the economy moving forward.
Original Source: financialpost.com
