Statistics South Africa has reported that GDP increased by 0.6% in the fourth quarter of last year, following a contraction of 0.1% in the third quarter. GDP for the full 2024 also grew by 0.6%.

Growth in the last quarter was primarily driven by agriculture, finance and trade sectors on the production side, while household spending supported growth on the expenditure side.

Government Communication and Information System acting director-general Terry Vandayar says the latest GDP data is encouraging and signals a welcome recovery, particularly because the Government of National Unity has been focused on business development and more opportunities for employment.

He points out that government has put in place a range of programmes and policies to support the growth of small businesses, develop infrastructure for faster economic growth, and encourage investment from inside and outside of South Africa.

“Working with various stakeholders, government will continue to build on this momentum to drive even greater economic resilience,” Vandayar states.

Financial services firm Nedbank, meanwhile, points out that while the 0.6% growth rate is positive and better than the bank’s forecast of 0.5% growth for the fourth quarter, it remains below the consensus market forecast of 0.9%.

The bank adds that agriculture, domestic trade, accommodation and finance provided much of the momentum in the last quarter, with agriculture having been supported by solid performances in field crops, livestock and horticulture, and trade having been buoyed by ongoing recoveries in consumer spending.

Transport, storage and communications were, however, the largest negative contributors, having contracted owing to decreased activity for land transport and transport services. Additionally, despite the absence of loadshedding in the period, mining and manufacturing output declined.

Moreover, Nedbank reports that expenditure on GDP grew by 0.6% in the fourth quarter, compared with 0.7% in the same quarter of 2023.

“The numbers reflect a likely start of gradual economic recovery. We expect the economy to gain moderate momentum throughout 2025. The boost will likely come from continued improvements in consumer demand as inflation remains subdued and interest rates ease a bit more, bolstering real incomes and lowering borrowing costs,” Nedbank says.

The bank also expects a recovery in fixed investment on the back of increased outlays on infrastructure by the public sector.

However, slower government spending owing to fiscal constraints and the persistent drag from net exports will likely contain the support from more robust consumer spending to GDP this year.

Nedbank forecasts GDP growth of about 1.4% for this year and 1.8% in 2026.

Financial planning firm PPS Investments deems the 0.6% full-year GDP growth rate as disappointing given the lack of loadshedding for most of the year. The firm says the country is yet to see a meaningful rebound in the economy and conditions remain insufficient to address structural challenges such as high unemployment and sovereign debt levels.

The firm notes that while the outcomes of some economic reforms are becoming more visible, such as in electricity and logistics, global risks have worsened, which could put a dampener on any near-term cyclical recovery in South Africa. 

The firm remains optimistic about the outlook for South African equities, but expect that global risks could impact the local market negatively.

Further, North West University Business School's Professor Raymond Parsons says government’s efforts with higher inclusive growth are paying off, but is still far away from the Medium Term Development Strategy target of reaching GDP growth of 3% – with 3% being the minimum needed for the country to begin making a dent in the unemployment rate.

He reiterates that the national Budget on March 12 must show a policy mix that carefully calibrates fiscal consolidation, avoids a negative tax-and-spend fiscal cycle and supports growth-enhancing measures.

Parsons adds that fixed capital formation remains a weak link in South Africa’s slow and uneven economic recovery, as it is still only 15% instead of the National Development Plan’s target of between 25% and 30%.

He explains that household spending, on the back of lower inflation, has done most of the “heavy lifting” in South Africa’s economic upturn so far.

“Higher sustainable growth also helps to create the economic buffers and resilience needed to mitigate any external shocks caused by elevated global uncertainty,” Parsons concludes.