South Africa’s GDP Growth Undermined by Agricultural Slump

AFRICAN BUSINESS AND ECONOMYDecember 4, 2024 at 8:36 AM UTC

TLDR

South Africa’s economy contracted by 0.3% in Q3 2024, driven by a 28.8% decline in the agricultural sector, the deepest slump in over three decades.
This contraction, caused by drought reducing output of key crops like corn, soybeans, and wheat, leaves year-to-date GDP growth at just 0.4%.
Economists at Nedbank and Goldman Sachs cut their 2024 projections to 0.5% and 0.6%, respectively, from 1%.

South Africa’s economy contracted by 0.3% in Q3 2024, driven by a 28.8% decline in the agricultural sector, the deepest slump in over three decades.

This contraction, caused by drought reducing output of key crops like corn, soybeans, and wheat, leaves year-to-date GDP growth at just 0.4%, raising doubts about the National Treasury’s 1.1% 2024 growth forecast.

Economists at Nedbank and Goldman Sachs cut their 2024 projections to 0.5% and 0.6%, respectively, from 1%. Others, including FNB and Bloomberg Economics, signaled likely downward revisions but remain optimistic about Q4 recovery, supported by improved consumer sentiment, lower inflation, and interest rate cuts.

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Points clés à retenir

The GDP contraction strengthens the case for South Africa’s central bank to deepen its rate-cutting cycle. Annual inflation has stayed below the 4.5% midpoint since August, prompting two rate cuts since September. Analysts predict further reductions, with Goldman Sachs projecting a terminal rate of 6.5%, as policymakers aim to bolster growth amid persistent economic headwinds.

South Africa

Economy

GDP Growth

Agriculture

Nedbank

Goldman Sachs