Bank of America: SSA economic outlook 2024

Bank of America is optimistic about South Africa's economic growth prospects for 2024 as they expect an improvement from the previous year. The key factors contributing to this positive outlook are the anticipation of fewer power cuts and potential interest rate relief that could boost consumer spending power. According to Bank of America, the country's growth is projected to reach 1.5 percent this year, a significant increase from the 0.5 percent growth seen in 2023. Tatonga Rusike, Sub-Saharan Africa Economist at Bank of America Global Research, discussed the economic landscape and potential risks in a recent interview on CNBC Africa. Rusike highlighted that 2024 is a crucial year for South Africa, with upcoming events such as central bank decisions, elections, and budget allocations set to shape the economic trajectory. Last year, the economy faced challenges, including power cuts that hindered growth. However, with improvements in power supply and increased investment in renewable energy sources, there is a sense of resilience in the economy that could drive momentum in investment spending. Consumer spending, which has been weak, is also expected to receive a boost from potential interest rate cuts later in the year. While the projected 1.5 percent growth is a positive sign, Rusike emphasized that in per capita terms, the growth rate may still be considered low. In comparison to other economies in the region experiencing higher growth rates, South Africa's growth outlook may seem modest. Rusike also discussed the potential for increased private sector investment in the country, particularly from foreign investors. He differentiated between long-term foreign direct investment (FDI) and short-term portfolio investments, noting that developments in the global environment, such as changes in the US Federal Reserve's policies, could influence portfolio investment decisions. The anticipation of a weaker US dollar in the second half of the year could benefit South Africa's exchange rate, making it more attractive to portfolio investors. Regarding the South African Reserve Bank's (SARB) monetary policy, Rusike suggested that a dovish pivot, indicating a shift towards interest rate cuts, may not occur until July. Despite market expectations for earlier rate cuts, the SARB is likely to focus on lowering inflation rates before considering monetary policy adjustments. The upcoming elections in May add a layer of uncertainty to the economic outlook, with the potential for a fragmented political landscape. While forecasts indicate a possibility of the ruling African National Congress (ANC) falling below 50 percent of the vote for the first time, the fragmented opposition may still allow the ANC to form a government. Rusike anticipates a noisy election period but ultimately expects the status quo to be maintained in terms of economic policy continuity. Overall, Bank of America's economic outlook for South Africa in 2024 is cautiously optimistic, with expectations of improved growth supported by factors such as stability in power supply, potential interest rate relief, and resilience in investment and consumer spending.