The speculation over whether South Africa will avoid a recession has finally been put to rest, with the GDP figures for the 4th quarter of 2023 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 1.2% in the 4th quarter of 2023, following a decline of 0.7% in the 3rd quarter. The economy has now grown at real positive rates for ten of the past eleven quarters and will hopefully start to gain some traction during 2024.
In the run-up to the announcement of the latest GDP data, most economists were hopeful of a modest growth rate, and they were not disappointed. For 2023 as a whole, the economy managed to grow at 0.6% in real terms, down from growth rates of 1.9% in 2022 and 4.7% in 2021.
The reasons behind the lacklustre rate of economic expansion are not difficult to find. First and foremost is the issue of restrictive monetary policy, which has led to the highest interest rates in 14 years, despite a glaring absence of demand inflation. With some luck, the Monetary Policy Committee of the Reserve Bank will appreciate the dire need for a resurgence of growth and lower the official interest rate at their meeting towards the end of March.
Another issue is the well-known problems associated with energy and transport logistics, with the Durban container harbour still battling to clear a backlog. If government manages to live up to its stated intention of closer cooperation with the private sector in solving these issues, the economy could well receive a welcome lift from more efficient logistics infrastructure modes during 2024.
Thirdly, prices for several of the country’s key export commodities were subdued during most of 2023, with gold being a notable exception. This has resulted in a much lower trade balance, whilst also impacting negatively on National Treasury’s revenue budget.
The economy also took a hit last year due to adverse weather conditions in major crop producing areas, with total agriculture output declining by 12% in real terms.
At least there was some good news for a number of key sectors of the economy that managed to increase their profitability during 2023, with manufacturing, trade & catering, electricity, and construction recording double-digit growth rates for their gross operating surpluses.
Another positive development is the reversal of the downward trend in the country’s average monthly salary, which managed to increase by 4.5% quarter-on-quarter to a level of R16,550 – obviously on the back of many people receiving bonuses in December!
With lower interest rates around the corner and the S&P Purchasing Managers’ Index (PMI) having just strengthened to above the neutral 50-mark, 2024 should easily beat last year’s growth performance.
