Economic data for the first quarter releases already seem to support the view that the economy did not grow, signalling bad news for GDP.
The outlook for the first quarter GDP figures is not great, and economists say the economy probably contracted instead of growing.
Crystal Huntley and Nicky Weimar, economists at the Nedbank Group Economic Unit, think that economic growth was likely stagnant during the first quarter. “High-frequency statistics reflected stagnant economic activity over the first quarter.”
“Agriculture will probably be the star performer. In contrast, activity in mining, manufacturing, electricity, construction and trade relapsed, still held back by a difficult operating environment, aggravated by persistent inefficiencies in essential economic infrastructure and the stronger base in the first quarter.”
They also do not expect that real gross domestic growth (GDP) is forecast to make any gains in the first quarter, slowing from 0.6% in the fourth quarter of 2024.
“Agriculture, transport and communications, finance, general government and personal services increased over the first quarter. However, while retail, motor trade sales and real income from accommodation and food services accelerated, wholesale sales fell, dampening the contribution from trade to overall GDP.”
They point out that energy, mining and manufacturing contracted, driven by the return of load shedding, infrastructure failures and subdued domestic and global demand.
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Despite bad GDP outlook for first quarter, economy will grow in 2025
But it is not all doom and gloom, they say. “We expect some acceleration in growth during the remainder of the year. The main boost will come from domestic demand, supported by firmer consumer confidence, sustained by a recovery in real household incomes driven by lower inflation and lower debt service costs due to lower interest rates.
“Despite minor progress on the structural front, operating conditions remain challenging and production costs high. The weaker global recovery will weigh on output, particularly given South Africa’s elevated cost structures, underlying inefficiencies and significant infrastructure constraints.
“Accelerating structural reforms are the key to enhancing the international competitiveness of industries. This would enable the economy to grow faster and create more jobs without hitting supply bottlenecks, driving up costs and stoking inflation.
“Overall, we expect growth of 1% in 2025 and 1.5% on average over the next three years. However, the uncertain global environment and implicit collapse of the African Growth and Opportunity Act (Agoa) pose significant downside risks.”
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Contraction of 0/1% expected for first quarter GDP
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say real GDP (not seasonally adjusted) grew by 0.9% compared to a year ago in the fourth quarter of 2024, up from 0.4% in the third quarter.
“On a seasonally adjusted (non-annualised) basis, the economy expanded by 0.6% in the fourth quarter, marking a modest rebound from a 0.1% contraction in the third quarter. Although there is uncertainty surrounding the notoriously volatile agricultural sector, and while it may perform relatively well, high-frequency data from other sectors suggest that the economy weakened in the first three months of this year compared to the last three months of 2024.
“We pencil in a quarterly GDP contraction of 0.1% (final estimate) for the first quarter, reflecting softer economic activity in higher-weighted sectors such as mining, manufacturing and trade.”
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Medium-term outlook for GFP
Over the medium-term, Huntley and Weimar expect the economy to recover in 2025. “Our forecast is for growth of 1.0% for the year, averaging 1.5% over the next three years. South Africa’s structural constraints remain pretty much the same, with only minor improvements from the previous year.
“Lower inflation and interest rates will provide impetus for demand. The outlook for agriculture is more promising for 2025. The La Niña rains boosted farmer sentiment. As of 30 April, the winter cereal planting intentions stood 1.1% higher than the production figures for 2024.
“Further optimism depends on better financial conditions for farmers given the lower interest rate environment, progress in controlling animal diseases and the hope that port improvements will continue.”
They say this is reflected in the Agribiz confidence index, which improved by 11 percentage points from the fourth quarter to the first quarter. However, they say several structural and cyclical challenges remain.
“The livestock industry continues to grapple with animal diseases and elevated feed costs, while excessive rainfall in some regions raised concerns about crop quality, and while wine production is recovering, it remains below pre-pandemic levels.
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Downside risks for GDP
“Further downside risks emanating from the Trump administration’s tariffs and the implicit end to Agoa, fractured geopolitics, port inefficiencies, poor rail and road infrastructure, crime, stock theft, worsening municipal service delivery, and ultimately, farm profitability. However, despite these headwinds, they forecast agriculture to grow by 10.3% in 2025 off last year’s low base.”
They also point out that after a relatively stable year, load shedding returned at the start of 2025, underscoring persistent vulnerabilities in the electricity system. “Excess demand nearly doubled between 2020 and 2024, while Eskom’s use of its compensatory load (including load interruptions, imports and open-cycle gas turbines) increased by 21%.
“Therefore, the reoccurrence of load shedding is unsurprising. Still, the situation has improved since the peak of the crisis in 2023. From 2023 to April 2025, excess demand dropped by 94%, manual load reduction by 95%, compensatory load usage by 65% and loadshedding by 94%.”
