Standard Bank sees positives for South Africa's economy in 2024

Africa's biggest lender Standard Bank took a positive view on the South African economy on Wednesday, forecasting GDP growth of 1.2% in 2024, up from a forecast 0.6% in 2023.

Chief economist Goolam Ballim told journalists at a presentation on the country's 2024 economic outlook that the bank thinks South Africa's economy will have “some level of resilience this year through a few elements”.

Ballim cited real wage growth as a factor contributing to the improved economic growth forecast.

Pay growth could hover around 6%, Ballim said, and forecasted inflation of around 5% on average for 2024, with the possibility of reaching the Reserve Bank's midpoint target of 4.5% by year-end.

This would allow for real income growth, the increase in income after accounting for inflation of 1% in 2024 and 1.5% by year-end, Ballim said.

This is not to be “cheered overwhelmingly”, but is positive considering the negative real income growth in some quarters over the past two years, he added. “Of course, the very fall in inflation itself serves as an economic lubricant.”

Stats SA data in January showed that inflation has been on the decline, averaging 6% in 2023, down from 6.9% in 2022 and back within the Bank's target range of 3%-6%.

In combating the persistent inflation, the Bank raised its main lending rate at 10 consecutive meetings since November 2021, before holding the current rate of 8.25% at its last four meetings. This has placed a burden on consumers, especially lower-income earners, and Standard Bank forecasts credit demand to decline.

“Credit demand in the economy, which is a very significant source of general spending for us, is declining and I think it's quite logical when you have such a material rise in interest rates,” Ballim said. “It's not surprising in terms of elevated average payments ... you have a very big pick up in terms of debt servicing costs,” he added.

Despite the bank's positive growth outlook, it has concerns over the growth investment in the country.

“I think South Africa is not quite at the stage where you can believe that there is going to be a resilient and enduring liveliness in consumer fundamentals so as to encourage growth investment, investment premised on persistent economic growth,” Ballim said.

The level of investment in the country is 10% below the levels before the global financial crisis of 2008, he added.

“Investment as a share of GDP has been declining. It is way below that 25% rule of thumb to merely maintain a level of growth persistence and therefore the elections, again, come to the fore in the sense that not only are we shifting ... [politically], the endeavour should be to create a catalytic climate for aggregate demand-led investment to buttress the potential of the economy.”

TimesLIVE