Marginal GPD growth secured in first quarter

Statistics SA has released the GDP figures for the first quarter of 2024, once more confirming that economic growth remains in place, albeit at a snail’s pace.

According to Statistics SA, the year-on-year real growth rate in the country’s GDP amounted to 0.5% in the first quarter of 2024, following an increase in total production of 1.4% in the fourth quarter of 2023. The economy has now grown at real positive rates for eleven of the past twelve quarters, despite the lingering after-effects of the COVID-19 pandemic and, since 2022, the restrictive monetary policy stance of the South African Reserve Bank’s Monetary Policy Committee (MPC).

The latter has led to the highest interest rates in 14 years, which have served to undermine household consumption expenditure and capital formation in the economy. South Africa’s economic fortunes have also been dealt a blow in recent years by a sluggish world economy, which has led to depressed prices for a range of commodity exports.

Fortunately, some of these – most notably gold – have started to recover, which could lift the value added by the mining sector in the coming months.

Exhibit 1 | GDP at basic prices (value added) first quarter 2024

Source: Statistics South Africa. First quarter data 2024. Past performance is not a reliable guide to future performance. For illustrative purposes only and not indicative of any investment.

Note: Total equals R1.03 trillion. Source: Statistics South Africa. First quarter data 2024. Past performance is not a reliable guide to future performance. For illustrative purposes only and not indicative of any investment.

The largest sector of the economy, which encompasses financial and business services and real estate, managed to record a nifty year-on-year real growth rate of 2.4% in the first quarter, whilst the personal services sector matched this performance.

An outstanding feature of the country’s economic performance over the past five years is the growing share of GDP commanded by these two service sectors. In the fourth quarter of 2018, their combined share of GDP at basic prices (value added) was below 40%.

It has since increased systematically to a level of almost 46%. The accompanying graph shows this progress, based on four-quarter averages (to eliminate seasonal influences).

In the event of the post-election government continuing to pursue closer cooperation with the private sector to improve the efficiency of the country’s logistics infrastructure (including the expansion of roads and harbour facilities), the resultant investment in capital formation could well provide a platform for higher growth during 2024 and beyond.

Exhibit 2 | Financial, business and personal services share of GDP at basic prices

Source: Statistics South Africa. First quarter data 2024. Past performance is not a reliable guide to future performance. For illustrative purposes only and not indicative of any investment.

Source: Statistics South Africa. First quarter data 2024. Past performance is not a reliable guide to future performance. For illustrative purposes only and not indicative of any investment.

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Author: Dr. Roelof Botha

Economic Advisor of the Optimum Investment Group. He navigates complex topics with clarity and optimism and with more than 40 years of experience, including  Finmedia Economist of the Year winner and Advisor at National Treasury, offers insightful perspectives on South Africa’s economic and political landscape.