The outlook for economic activity in South Africa has continued to cast a cautious shadow for the year 2025 despite a slight rebound in the country's gross domestic product (GDP) in the fourth quarter of 2024.

Data from Statistics South Africa (Stats SA) on Tuesday showed that real GDP increased by 0.6% in 2024, following an increase of 0.7% in 2023.

The growth outcome fell short of projections from the government agencies, which had anticipated a rebound to 0.8% this year and 0.9% forecast by the International Monetary Fund, bolstered by nearly 300 days of uninterrupted power supply.

Stats SA said the 2024 GDP print was primarily led by higher economic activities in finance, real estate and business services, personal services, and electricity, gas and water.

The agriculture; construction; trade; transport; manufacturing; and general government services industries recorded negative growth in 2024.

Dr Elna Moolman, Standard Bank Group head of South Africa macroeconomic research, said the data was still reflective of a very weak economy as seven out of the 10 economic sectors contracted in the fourth quarter relative to the third quarter.

“More worrying is that in many sectors, real GDP was still below their pre-COVID levels in the fourth quarter of last year. This is most acute for the construction sector where real GDP was 25% below its pre-COVID level,” Moolman said.

“We are encouraged by growth-supportive reforms in the domestic economy. We have seen improvements in the electricity sector. The data tells us that there's also progress in the logistics sector, but we are concerned about growing headwinds from the global economy. We are therefore concerned about downside risks to our expectation for significantly better growth in 2025 than the 0.6% registered last year.”

Perhaps the most encouraging news was witnessed in the fourth quarter of 2024, where GDP saw an increase of 0.6%, bouncing back from a downwardly revised contraction of 0.3% to 0.1% in the third quarter, and dodging a technical recession of two consecutive quarters of negative growth.

FNB senior economist, Thanda Sithole, said though GDP growth rebounded in the fourth quarter, it reflected broad-based weakness in 2024.

Despite the disappointing growth outcome in 2024, Sithole said they remained cautiously optimistic that GDP growth should accelerate toward 2.0% in 2025-2026 and exceed this threshold in 2027.

“However, this pace of growth remains insufficient to significantly reduce unemployment and poverty. Key growth drivers include stable and low inflation, the economic boost from two-pot retirement savings withdrawals, easing monetary policy, and structural reforms in energy and logistics,” Sithole said.

“The stability of the Government of National Unity (GNU) and the effective implementation of its policy priorities will be critical to sustaining growth. However, risks remain, including heightened global trade policy uncertainty, weak external demand, and domestic headwinds such as a more-restrictive tax policy, faster-than-expected inflation, and a slower pace of interest rate cuts, all of which could weigh on growth.”

Expenditure on GDP mirrored this growth, increasing by 0.6% in 2024, following a similar rise of 0.7% the previous year. Household final consumption expenditure (HFCE) revealed some strength, rising by 1.0%.

North-West University Business School economist, Prof Raymond Parsons, said the latest data again emphasised that growth in South Africa has been too low for too long and must be remedied by maintaining the right economic environment for investment and growth.

“Fixed capital formation remains a weak link in SA’s slow and uneven economic recovery, as it is still only at about 15% of GDP instead of the National Development Plan’s target of 25%-30%,” Parsons said.

“Household spending has done most of the ‘heavy lifting’ in SA’s economic upturn so far. Higher sustainable growth also helps to create the economic buffers and resilience needed to mitigate any external shocks caused by elevated global uncertainty.”

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