Stronger South African Economic Growth On The Horizon

Economists surveyed by Bloomberg expect growth of 1.7 this year, compared with 0.7 estimated for 2024 and less than 1 on average in the prior 10 years.

The economy has "a credible prospect of stabilisation" after many years of deterioration, said Elna Moolman, head of South Africa macroeconomic research at Standard Bank Group.

Factors conducive to growth include political cooperation through a coalition government formed by the ANC after it lost its outright majority in elections last year. Lower interest rates, higher levels of fixed investment and the ongoing improved performance of the country's electricity, transport and logistics sectors will also have a positive impact, said Kenneth Creamer, an economist at Wits University in Johannesburg.

Economists expect the central bank to lower interest rates by 50 basis points to 7.25 in the first quarter with inflation seen remaining below the 4.5 midpoint of its target range. That would total 100 basis points of cuts since its easing cycle started in September and could add 30 basis points to economic growth as consumer spending increases, said Reezwana Sumad, a senior research analyst at Nedbank CIB.

"If we implement all of the reforms and we get a proper private sector response, then we can start thinking about growth rates that are enough to properly reduce unemployment and reduce government debt," said Moolman.