By Thanda Sithole
Real GDP (not seasonally adjusted) grew by 0.9% y/y in 4Q24, up from an upwardly revised 0.4% (previously 0.3%) in the previous quarter. On a seasonally adjusted (non-annualized) basis, the economy expanded by 0.6% q/q, marking a modest rebound from an upwardly revised 0.1% contraction (previously -0.3%) in 3Q24.
On a seasonally adjusted (non-annualized) basis, the economy expanded by 0.6% q/q, marking a modest rebound from an upwardly revised 0.1% contraction (previously -0.3%) in 3Q24. The outturn, largely driven by a strong recovery in agriculture, forestry, and fishing, aligned with our final estimate but slightly underwhelmed the Reuters consensus expectation of 0.9%.
As anticipated, retrospective revisions to 1Q24-3Q24 data were evident in the agriculture, forestry, and fishing GDP. However, even with these adjustments, overall GDP growth remained subdued at 0.6% in 2024, down from 0.7% in 2023, reflecting contractions in six out of ten sectors. The largest decline (-8.0%) was recorded in the drought-affected agriculture, forestry, and fishing sector. Excluding this sector, the economy would have expanded by 0.8% in 2024.
Outlook
Despite the disappointing growth outcome in 2024, we remain 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. Additionally, the government's push to expand public infrastructure investment should provide further support.
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.
Supply- and demand-side drivers
Growth was recorded in only three out of ten sectors in 4Q24. The agriculture, forestry, and fishing sector rebounded strongly, expanding by 17.2% q/q (from -19.7% in 3Q24, previously -28.8%), contributing 0.4 percentage points (ppts) to overall GDP growth. This was driven by increased activity in field crops and animal products. The finance, real estate, and business services sector maintained its growth momentum, expanding by 1.1% q/q and contributing 0.3ppts. Meanwhile, the trade, catering, and accommodation sector rebounded by 1.4% q/q (from -0.6%), supported by gains in wholesale, retail, and motor trade.
The largest contraction occurred in the electricity, gas, and water sector (-1.4% q/q), reflecting lower electricity production and consumption. The transport, storage, and communication sector (-1.0% q/q) declined due to weaker activity in land freight transport and transport support services. Other contractions were recorded in manufacturing (-0.6% q/q), led by weaker output in basic iron and steel, metal products, machinery, and motor vehicle components. The general government services (-0.5% q/q), construction (-0.4% q/q), mining and quarrying (-0.2% q/q), and personal services (-0.2% q/q) sectors also saw declines.
Real private household consumption rose by 1.0% q/q (from 0.4% in 3Q24), supported by strong growth in semi-durables (3.9%), durables (2.2%), and non-durables (1.6%), while spending on services fell slightly (-0.2%).
Gross fixed capital formation (GFCF) declined by 0.7% q/q (following 0.3% growth in 3Q24), weighed down by contractions in government and public corporation investment. However, private business investment rebounded by 1.1% q/q (from -0.8%). For 2024, GFCF shrank by 3.7%, slightly weaker than our projection of -3.2%.
Real exports of goods and services increased by 2.1% q/q, recovering from a 4.3% contraction in the previous quarter. Similarly, imports rose by 2.0% q/q (from -4.2%). However, their net contribution to GDP growth was neutral, with real net exports of goods and services recorded at R44.6 billion.
