PPS: GDP Commentary Q4 2024

As expected, the South African economy rebounded in the fourth quarter of 2024, with GDP growth coming in at 0.6% real, quarter-on-quarter. Third quarter growth was also revised higher, from -0.3% to 0.1% quarter-on-quarter.

For the full year, the SA economy grew 0.6%, which is somewhat disappointing considering the lack of loadshedding. Weak household consumption was partly to blame, with the higher rate environment eating into disposable incomes. Investment was also weak, detracting from growth, while net exports added.

We have yet to see a meaningful rebound in the SA economy, which has contended with around 1% average annual growth post the GFC. This is simply not enough to address our structural challenges such as high unemployment and sovereign debt levels. Prior to the GFC our economy averaged growth above 3%, which shows it is indeed achievable.

Going forward, we are satisfied with the direction of travel in SA, with economic reforms now visible but needing acceleration. Prior headwinds, such as electricity and logistics are becoming tailwinds, while cyclical forces such as lower inflation and interest rates have also turned in favour. Unfortunately, global risks have risen, which could put a dampener on any near-term cyclical SA recovery.

Portfolio positioning across the PPS range of funds still reflects our expectation of a local cyclical economic upswing and better growth going forward. Although we remain optimistic and therefore overweight SA equity in multi-asset portfolios, we have trimmed some exposure this year, considering global risks which could impact the local market negatively.