South Africa’s economy is expected to grow at some 1.6% over the next three years, with real Gross Domestic Product (GDP) reaching 0.6% in 2023.
“Despite the improved global outlook for 2024, South Africa’s near-term growth remains hamstrung by lower commodity prices and structural constraints. We estimate real GDP growth of 0.6% in 2023. This is [revised] down from 0.8% growth estimated during the 2023 MTBPS [Medium Term Budget Policy Statement].
“The revision is due to weaker-than-expected outcomes in the third quarter of 2023, particularly in household consumption and fixed investment,” said Finance Minister Enoch Godongwana, who delivered the Budget Speech at the Cape Town City Hall on Wednesday.
Godongwana said despite this, between 2024 and 2026, growth is projected to average 1.6%.
“The growth outlook is supported by the expected easing of power cuts as new energy projects begin production, and as lower inflation supports household consumption and credit extension.
“But, there are also risks to the domestic outlook. These include persistent constraints in electricity supply, freight rail and ports, and a high sovereign credit risk. Our challenge… is that the size of the pie is not growing fast enough to meet our developmental needs,” he said.
National Treasury’s 2024 Budget Review explained that load shedding and challenges in freight rail and the ports “continue to disrupt economic activity and limit the country’s export potential”.
“Comprehensive reforms are underway in these sectors, although it will take time to see a recovery in growth. Household consumption is under pressure from high living costs, and investment remains low due to weak confidence and challenging business conditions linked to structural constraints.
“To turn the tide and raise economic growth sustainably, government is prioritising energy and logistics reforms, along with measures to arrest the decline in state capacity.
“Successful efforts to improve the fiscal position, complete structural reforms and bolster the capacity of the State will, in combination, reduce borrowing costs, raise confidence, increase investment and employment, and accelerate economic growth,” National Treasury said.
The department said as reforms begin to bear fruit, GDP will be on the rise.
“[This] as the frequency of power cuts declines, lower inflation supports household consumption, and employment and credit extension recover gradually. New energy projects will improve fixed investment and business sentiment.
“To accelerate GDP growth after an extended period of weak economic performance, South Africa needs large‐scale private investment. Government is working to improve the fiscal position, complete structural reforms and bolster the capacity of the State to reduce borrowing costs, raise confidence, increase investment and put the economy on a higher, job‐creating growth path,” Treasury said.
Meanwhile, global growth is forecast higher at some 3.1% for 2024 and 3.2% for 2025.
“The moderate improvement is due to better‐than‐expected growth in the second half of 2023, particularly in the United States and several large emerging market economies, as well as fiscal support for disaster relief in China.
“Robust US economic growth has partially offset weaker‐than‐expected outcomes in the Euro area, which, nevertheless, is expected to recover gradually. Commodity prices are expected to continue to decline in 2024 and 2025,” Treasury said.
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