Podcast Summary
South African economy growth Q2 2024: The South African economy grew by 0.4% in Q2 2024, but remains weak with some sectors still smaller than pre-pandemic levels, and growth expected to be slow in H2 2024. Easing of constraints and construction sector improvement supported growth.
The South African economy grew by 0.4% in the second quarter of 2024, according to the latest GDP print. While this growth is a relief after a flat first quarter and a near-zero growth rate, it remains weak and is expected to improve only slightly in the second half of the year. The recovery was supported by the easing of constraints, particularly the absence of load shedding and some improvement in the construction sector. However, several sectors are still smaller than they were before the COVID-19 outbreak and national lockdown, providing context for the economy's overall weakness. Additionally, the industries showing signs of growth, such as business services and real estate, are not mass employment creators.
Services sector growth vs Goods sector challenges: The economy's growth is driven by services sectors, but goods sectors face infrastructure issues, leading to a contraction in private sector expansion and investment, resulting in weak overall economic growth
The economy's growth is primarily coming from the services sectors, while the goods sectors continue to face infrastructure bottlenecks. This has resulted in a lack of expansion and investment in long-term capital stocks, leading to a contraction in the private sector during the first half of the year. Despite hopes for political changes and policy reforms to stimulate growth, the economy remains weak with mixed data. Overall, the economy is not seeing a solid positive response and is instead just recovering from previous challenges rather than experiencing true growth.
South African economy Q2 growth, consumer relief: Despite Q2 growth and lower inflation, overall economic growth in 2023 is expected to be disappointing, but potential interest rate cuts and GNU success could bring relief to consumers
The second quarter expansion in the South African economy was a relief for consumers due to lower food and fuel inflation. However, the overall growth rate for this year is expected to be disappointing and weak. The second half of the year may bring more support for consumers with lower inflation and potentially lower interest rates. For ordinary South Africans, it might take more effort to see tangible improvements in their lives, and the success of the GNU could be a potential source of optimism. The economy's primary and secondary sectors and fixed capital formation may not directly impact ordinary people, so they are eagerly waiting for visible progress.
South African economic recovery: South Africa's economic recovery is predicted to start showing signs in the second half of this year, with significant growth expected from 2026 onwards, but realism is needed regarding the timeline for full recovery
While the economic reforms in South Africa, such as the Growth and Transformation Plan and the cabinet reshuffle, are expected to bring positive changes, it will take time before these changes become noticeably apparent. The second half of this year is predicted to show some growth, but next year could see a significant increase, potentially reaching almost 2% relative to 1% this year. The long-term outlook is more promising, with a credible expectation of sustained 2% or more growth from 2026 onwards. This means that firms will expand, leading to employment growth, but it will take some time before these improvements become more visible. Dr. Alna Mooman, head of macroeconomic research at the Standard Bank Group, emphasized the need for realism regarding the timeline for economic recovery.