South Africa Likely Avoided Recession in 2024, Boosted by Consumer Demand

South Africa’s economy likely sidestepped a recession last year, driven by robust consumer demand in the final quarter of 2024. While the mining and manufacturing sectors remained sluggish, strong retail sales and improved consumer spending provided much-needed relief.

Retail Sales Lift Growth

According to Oxford Economics economist Jee-A van der Linde, the country’s industrial sector is “basically stagnating,” but consumer demand has stepped in to provide some economic momentum. Retail sales expanded by 2.1% in Q4, helping offset weaknesses in other key sectors.

Economists surveyed by Bloomberg estimate that South Africa’s economy grew 0.8% in Q4 2024, recovering from a 0.3% contraction in Q3. Official data is expected to confirm this when released in Pretoria on Tuesday at 11:30.

Consumer Spending and Interest Rate Cuts Provided Relief

Several factors helped boost consumer spending in Q4:

• Benign inflation, which kept the cost of goods stable.
• Two 25-basis point interest rate cuts in the second half of 2024, making borrowing cheaper.
• Early pension fund withdrawals, allowing South Africans to access part of their retirement savings without penalties.

These drivers are expected to support economic momentum into early 2025, alongside a potential recovery in mining and manufacturing as logistical bottlenecks begin to ease.

Slow Recovery and Growth Challenges in 2025

Despite avoiding a technical recession, South Africa’s growth outlook remains weak. A separate Bloomberg survey predicts GDP growth of just 1.7% in 2025, far below the 3% target set by the governing coalition.

Low growth levels mean unemployment and poverty will remain critical challenges. With investment in infrastructure declining over the past decade, the economy continues to struggle with structural weaknesses.

Investor Uncertainty Amid Political and Global Risks

A key challenge for South Africa’s economic recovery is attracting private investment. Fixed investment has declined by an average of 1.3% per year over the past decade, limiting economic expansion.

Adding to uncertainty are potential protectionist policies from U.S. President Donald Trump, which could discourage business confidence in South Africa.

Van der Linde also noted that while the formation of the Government of National Unity (GNU) initially created a sense of optimism, investment levels may decline again due to political uncertainty.

“There could have been a temporary increase in investment during the fourth quarter, during the euphoria of GNU, but from the first half of this year it goes down again due to uncertainty,” he said.

What Lies Ahead for South Africa’s Economy?

While South Africa likely avoided a recession in 2024, growth remains too weak to significantly improve employment and living standards. Stronger investment, infrastructure development, and policy stability will be key to sustaining long-term economic momentum.

As 2025 unfolds, all eyes will be on whether government policies, global economic conditions, and investor confidence can push South Africa toward a more sustainable growth path.

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