Macro Pulse Episode 7

So 60% of the population currently believes that the GNU is putting us on the right path. And this will be key as we go into 2025 and 2026 next year when we will face the next local government elections. You can potentially expect more political noise to start to emerge again. But thus far, the GNEWS holds. And what’s key to the GNEWS ability to hold and continue for the future is Cyril Ramaphosa and growth.

If Cyril remains popular, the president will be able to keep the GNU together. And if growth returns to the economy, people will look favorable on the GNU. Now the reform agenda in this regard is is important. And a most recent study by the BER, Bureau of Economic Research, has shown that we could improve the country’s growth by one to one and a half percent if we bring in some of the reforms. And in particular, they’ve pointed out investment as well as exports.

If we can improve our exports capability by investing in our network economy, getting ports, railway in electricity back into the system, allowing us to benefit from high commodity prices when they present itself. And also on the investment front, as business and consumer confidence increases, we are seeing the investment environment, landscape improving. That allows for the private sector also to play a bigger role in the economy. These two things could easily see the economy grow at close to three and even above 3%. The second surprise was The US economy.

Coming into 2024, the market consensus for US growth was 1.3%. And what we got was something close to double that, about 2.7, two point eight percent. We also saw the S and P 500 rose by almost 30%. Now looking into 2025, we don’t believe that these growth rates could be sustained and maintained. And therefore, we think we’re probably looking at the growth that’s surprising to the downside relative to current expectations.

Currently, the market sees The US economy growing at about 2.1%, and we think that risks us to the downside. The reason for that is we are seeing a slowing labor market, robust but slowing labor market. Interest rates are still fairly high, which means that overall conditions are still fairly tight. And now we also have to deal with Trump’s trade policies as well as immigration policies, which could be growth detrimental. These policies will also expect to come in early into this term.

And so we believe that there could be a slight growth impact. And therefore, our core that growth could slightly surprise to the downside, which will most likely keep the Fed to continue to cut interest rates. The third surprise was China’s u-turn to support economic growth in September of last year. Up until September, we saw a real lack and reactiveness to supporting economic growth from Chinese authorities. And then from September, we saw the authorities started to cut interest rates, they’ve cut mortgage rates, they’ve cut restrictions to be able to buy property.

We haven’t seen yet the full fiscal package which we are being promised, but we believe that that will come in the next couple of months with the new, NPC meetings coming up. And we believe that these fiscal policy measures will be allowed to stimulate the consumption as well as support and stabilize the property market. We’ve also saw more recently that monetary policy will be become more loose and also supporting economic growth. However, the growth outlook remains fairly unpredictable and uncertain given still the impact of trade tariffs potentially on China. And to some extent, for us to see how these policies that will be put in place by the authorities will eventually impact the economy.

So the market at the moment sees China’s growth at about 4%. And we believe that there’s probably in the ballpark, four to four and a half percent in our view, with a big margin of error around that given the uncertainty of growth. But we believe that there’s a definite intent and willingness by the Chinese authorities to support growth, at least from a cyclical perspective. That’s all for this first episode of 2025. I look forward to this year and to engage with you throughout the rest of the year.

All the best.