Economists remain cautiously optimistic about South Africa’s economic growth prospects for the coming year. However, they warn that global and geopolitical events, particularly in the United States, could pose significant challenges.
Economist Dawie Roodt shared his insights, highlighting some positive trends. “There are a couple of pluses that I am fairly sure of. One is that inflation is relatively low. Inflation is currently well below the midpoint of the Reserve Bank’s inflation target band, which means the Reserve Bank is likely to reduce interest rates again. I wouldn’t be surprised if we see a full percentage cut in interest rates over the next couple of months. This will boost local demand and benefit the economy.”
Roodt also noted political developments as another source of optimism. “The other plus has to do with politics. We know we have a so-called Government of National Unity (GNU), which seems to be holding so far. This brings improvements in efficiency and sentiment toward South Africa, which could eventually spill over into economic growth. Additionally, financial markets have responded positively to the GNU, leading to lower inflation and other factors that will contribute to growth.”
However, Roodt cautioned that there are significant risks. “One is that the GNU might not hold. There are internal disagreements within the ANC about the Government of National Unity, and if it collapses, that would be a big negative for South Africa. The biggest concern, though, is on the international front. President-elect Donald Trump has repeatedly threatened to impose tariffs on countries that undermine the US dollar. This poses a potentially significant risk to the global economy and, by extension, South Africa.”
Roodt provided a sobering analysis of South Africa’s economic performance over the past 15 years, noting that the country has consistently underperformed. “On a per capita basis, South Africa has been getting poorer for most of the past 15 years. Even with the positive factors I’ve mentioned, I cannot see the South African economy growing by more than 1,5%. When compared to population growth, which exceeds this rate, we’re likely to see another year of stagnant income, high unemployment, and a further decline in per capita GDP, though slightly better than what we experienced in 2024.”
While the outlook includes some bright spots, the balance of risks suggests that South Africa will continue to face economic challenges in the year ahead.
Listen to the full interview below
VOC News
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