South Africa avoids recession

South Africa’s economy expanded modestly in the fourth quarter following a mild contraction in the previous period.

Gross domestic product expanded 0.6% in the three months through December, compared with a revised contraction of 0.1% in the prior quarter, Statistics South Africa said in a report released in the capital, Pretoria, on Tuesday.

That undershot the 0.8% median estimate of 10 economists polled in a Bloomberg survey.

Growth for the full year was 0.6%, compared with 0.7% in 2023.

The agriculture and finance sectors were the biggest contributors to growth, expanding 17.2% and 1.1% respectively in the quarter.

Household consumption expenditure, which accounts for about two-thirds of GDP, grew by 1% in the fourth quarter. 

Consumer spending in the quarter received a boost from benign inflation, two 25 basis-point interest-rate cuts in the second half of last year and pension fund members having early access to part of their retirement savings without penalties.

That momentum is expected to carry into 2025 after another quarter-point cut in January. 

A separate Bloomberg survey foresees the economy expanding by 1.7% this year. Still, such an outcome is too tepid to dent one of the world’s highest unemployment and poverty rates and much less than the 3% growth rate targeted by the governing coalition.

Investors will watch Finance Minister Enoch Godongwana’s March 12 budget for plans to further support growth. A previous spending plan was rejected by members of the coalition over a proposal to raise an additional R191 billion over the next three years by sharply increasing value-added tax.