Rédaction Africa Links 24 with Ed Stoddard
Published on 2024-03-05 14:57:47
South Africa’s economy narrowly avoided a recession in the fourth quarter of 2023, with a meager 0.1% GDP growth saving the country from the dreaded “R” word. This data, released by Statistics South Africa, showed a slight improvement from the previous quarter’s 0.2% contraction. However, the overall annual GDP growth for 2023 was only 0.6%, significantly lower than the meager 1.9% growth seen in 2022.
Economists have forecasted a subdued GDP growth of only 0.7% to 1.5% for 2024, highlighting the ongoing challenges facing South Africa’s economy. These challenges include high levels of unemployment, poverty, and inequality, which require much stronger economic growth to address effectively.
The slow economic growth can be attributed to various factors, including persistent power shortages, logistical challenges, deteriorating local government services, and high levels of crime. These structural constraints, coupled with a high-cost environment, are limiting the country’s growth prospects in the near term.
Despite the slight GDP growth in Q4 2023, the performance of key industries was mixed. While sectors like transport, storage, and communication showed moderate growth, others like manufacturing and agriculture struggled. The agricultural sector, in particular, saw a sharp decline of 9.7%, exacerbated by weather conditions like the El Niño system affecting crop production.
Investment, as measured by gross fixed capital formation, also declined in Q4 2023, following a significant drop in the previous quarter. This trend reflects years of underinvestment in the economy, which is seen as a major contributing factor to South Africa’s growth challenges.
Looking ahead, economists do not expect a significant improvement in the South African economy in the short term. Structural constraints, coupled with a lack of investment, are likely to continue to weigh on growth prospects. The South African Reserve Bank is unlikely to cut interest rates soon, given the uncertain economic environment and global factors affecting the country’s currency.
In addition to economic challenges, political uncertainty ahead of the upcoming elections is also a concern for investors. The lack of clear policy direction could further dampen investment and economic growth in the country.
While South Africa managed to avoid a recession in Q4 2023, the narrow margin by which it did so highlights the fragility of the economy. Avoiding a recession is just the first step, and significant efforts are needed to stimulate sustainable and inclusive growth in the country.
Read the original article on Daily Maverick
