Reserve Bank expects South African economy to grow 1.2% in 2024

The South African Reserve Bank (SARB) expects the local economy to grow a meagre 1.2% in 2024 and 1.3% in 2025. 

This was revealed in the SARB’s Monetary Policy Committee’s (MPC) statement at its first meeting of the year, where it chose to keep interest rates stable for the fourth meeting in a row. 

It revised down the GDP growth it thinks South Africa experienced in 2023 to 0.6% from the 0.8% it expected at its previous meeting in November. 

The Reserve Bank said the deterioration in the performance of its ports and rail has seriously constrained the local economy. 

Transnet’s failures and lengthy periods of load-shedding contributed to weak economic growth in 2023 and higher inflation throughout the year. 

“These constraints are expected to persist, severely limiting the potential growth of the economy,” the MPC statement read. 

On a more positive note, the Reserve Bank expects the electricity supply to increase gradually over the long term due to the rapid uptake of alternative energy sources from the private sector. 

South Africa, being a small and very open economy, is highly vulnerable to changes in the global economic environment.

And so, weaker-than-expected global economic growth will also weigh on the performance of the local economy. 

The Reserve Bank expects global economic growth of only 2.6% in 2024, resulting in a minor uptick in demand for South Africa’s valuable mineral resources. 

SARB Governor Lesetja Kganyago cautioned that global economic conditions are deteriorating, and the outlook remains uncertain. 

This may lead to global shocks negatively impacting the South African economy and inflation. 

In most countries, reaching inflation targets, reducing fiscal deficits, and containing or lowering public debt levels will be key priorities. Thus, monetary and fiscal policies are expected to remain tight globally. 

Kganyago also warned that geopolitical tensions threaten supply chains, economic output, and prices, raising the possibility of a rise in global inflation.