The economic outlook for South Africa is rather disappointing given the reaction of markets towards the formation of the Government of National Unity (GNU), despite inflation being revised downwards; the country’s economy remains stubborn.
Cost of living remains a headache in South Africa, though there have been some positive economic activities happening, including the consecutive drop in fuel prices, the reduction of the repo rate and the Rand trading firmer against the US Dollar, it was disappointing to hear that domestic economic outlook, real GDP growth has been forecasted downward to 1.1 percent in 2024 compared to the estimate of 1.3 percent in February.
Global economy and trade are showing a recovery from the 2019/20 global pandemic, with some Central Banks in developed countries lowering their inflation. Furthermore, global economic growth is forecasted at 3.2 percent in 2024 and 2025.
During his Mid-Term Budget Policy Statement (MTPS), the Minister of Finance Mr Enoch Godongwana said global trade is expected to grow by an annual average of 3.3 percent over the same period.
The positive trajectory may present South Africa with an opportunity to grow its economy, however, Gondongwana pointed out that there are threats affecting global markets, which in turn may affect developing economies like South Africa.
“There are several risks to this outlook. These include persistent geopolitical tensions, and the threat of escalating conflict in the Middle East remains a concern. Wars elsewhere, such as in the Sudan and the conflict between Ukraine and Russia, threaten regional and international stability, as well as global trade.
These risks imply that emerging markets and developing countries such as South Africa will continue to face headwinds over the medium term,” said Minister Enoch Godongwana.
During the negotiations for a GNU, markets reacted in favour of the GNU, mostly reflected by the Rand on the JSE. With the inception of the GNU, much was expected from the performance of the economy; but the end result show that the GNU may not be as effective as most people hoped for, this is despite positive economic activities in the country.
Though real GDP growth has been forecasted downward, Gondongwana says over the medium term, growth is forecast to average 1.8 percent.
“This underscores the need for higher inclusive growth to meet the aspiration of a better life for all. This policy statement outlines our strategy to lift the economy to a higher and more inclusive growth path,” he said.
Though in the past week, the GNU showed some cracks within, Godongwana remains positive that the GNU will work and carry out its four pillars. He outlined the pillars as follows:
One is maintaining macroeconomic stability; • Two is implementing structural reforms; Three is supporting growth-enhancing infrastructure; and • Four is building state capability.