By Lee-Yandra Paulsen
As South Africa grapples with an unresolved energy crisis, logistical bottlenecks, and impending general elections, economists predict a challenging year ahead. Economist Dawie Roodt sheds light on the economic outlook for 2024.
Roodt emphasizes the international context, noting the potential impact of conflicts in the Middle East and Ukraine on variables like oil prices. “South Africa is a small open economy, and whatever happens internationally will significantly affect us,” he warns.
However, Roodt sees a positive turn in global inflation, expecting international central banks to cut interest rates. He believes this trend will influence South Africa positively, alleviating concerns about inflation. Roodt anticipates the South African Reserve Bank responding with interest rate cuts.
On a hopeful note, Roodt predicts a slight decrease in fuel prices, citing the potential positive impact on inflation and subsequent interest rate cuts. Nevertheless, he anticipates challenges in the upcoming budget speech by Minister of Finance Enoch Godongwana.
Roodt outlines the minister’s dilemma, facing unsustainable fiscal accounts and state debt. “Either he must start cutting state spending or increasing taxes,” Roodt asserts, acknowledging the difficulty of both options. Failure to address these issues could lead to a financial crisis, he warns.
Complicating matters, South Africa faces an election this year, making it challenging for politicians to make tough decisions that may upset voters. Roodt predicts a cautious approach from the government in addressing fiscal concerns. The private sector, in turn, adopts a wait-and-see stance, anticipating potential shifts in government and policies after the elections.
Political uncertainty, according to Roodt, tends to translate into weaker economic activity. He foresees limited economic growth, attributing it to factors like the ongoing electricity challenges. Despite the possibility of some growth, Roodt cautions that South Africa’s economic expansion is capped at around 1%.