Looking back at 2024 and ahead 2025

Sanisha Packirisamy, chief economist of Momentum Investments 

Here are the top 10 surprises looking back at 2024: 

1. A hostile environment for incumbent parties 

In an era where voters often conflate domestic governance with global challenges, incumbent leaders have experienced a loss of electoral support. Rising inflation rates, in particular, have led to severe consequences for those in power. 

2. Donald Trump’s historic return 

As inflation and stagnant real wages weighed heavily on families, Trump’s focus on job creation and tax cuts resonated deeply, enabling him to successfully court apolitical young men during the election campaign. 

3. Reshaped interest rate expectations 

Concerns about inflation have intensified, leading to the potential for higher terminal rates, as Trump’s agenda – including substantial tax cuts and tariffs – could stoke price pressures and complicate the Federal Reserve’s path forward. 

4. The August market correction and the Bank of Japan’s bold shift 

The unwinding of the Japanese yen carry trade heightened market volatility, further complicated by fears surrounding a weakening United States (US) labour market and heightened geopolitical uncertainties. 

5. China’s stimulus measures amid domestic constraints 

Fiscal interventions may stabilise the property market but they are unlikely to catalyse a robust rebound in consumer demand. Increasing salaries and expanding social security measures are needed to provide households with greater financial security. 

6. South Africa’s (SA) energy sector turned the corner 

The end of loadshedding has come as a surprise to many, primarily due to the rapid rollout of the Energy Action Plan, which includes initiatives to repair ageing power stations, increase private generation capacity and procure renewable energy sources. 

7. A local political shake up 

The shift in SA’s political landscape can be attributed to a confluence of factors, including widespread discontent with the African National Congress’s governance, failures in service delivery and economic stagnation. 

8. Flurry of legislation signed into law 

Legislative measures are addressing the pressing challenges facing the country. However, not all developments in SA have not been without contention, including bills related to pension fund amendments, land reform and the national health insurance. 

9. Intensified debate over SA’s inflation goals 

After curbing inflation, there has been renewed discussion about establishing a revised target closer to 3%. Nevertheless, stubborn inflation in certain categories including medical aid, electricity and water remains a concern. 

10. A vote of confidence for SA’s structural reforms 

Standard and Poor’s Global Ratings’ positive outlook on SA’s sovereign rating of BB- reflects the government’s efforts at enhancing governance, accelerating economic reforms and focusing on attracting private investment. 

Here are the top ten trends to look out for in 2025: 

1. Trump’s economic playbook and its global implications 

Trump’s proposed foreign policy and immigration reforms, anticipated tax cuts and deregulation efforts can significantly impact both domestic and international markets, initially driving a divergence in growth between the US and the rest of the world. 

2. The future of American exceptionalism 

A more insular approach to domestic and foreign policy could foster perceptions of a US retreat from its historical ties to international alliances and multilateral agreements, thereby undermining the foundational tenets of American exceptionalism. 

3. Problems in the last mile of disinflation 

Trump’s proposed policies may complicate efforts to sustain a fall in inflation. His administration’s emphasis on aggressive tariffs, mass deportations and expansive tax cuts could inadvertently undermine progress toward lower inflation rates. 

4. China’s plans to combat Trump’s tariffs 

Future stimulus efforts should prioritise social welfare spending and support for the beleaguered real estate sector, rather than continuing the traditional focus on industrial investment and infrastructure projects. 

5. Trump’s high-stakes game of diplomacy 

If Trump opts for quick fixes over nurturing strategic alliances, adversarial powers like Russia and China could seize the opportunity to expand their influence in key regions. The unpredictability of his policies risks escalating tensions and igniting new conflicts. 

6. The government of national unity’s (GNU) test against time to deliver 

Despite positive sentiment surrounding the GNU, without substantial improvements in economic performance – particularly regarding job creation – a backlash against the coalition could emerge. 

7. Private sector to increasingly fuel SA’s economic recovery 

An improved rail network statement coupled with revised access pricing will likely encourage private sector investment; however, meaningful improvements in rail infrastructure are expected to take three to five years to materialise. 

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8. From revived investor sentiment to a tangible recovery 

Fewer manufacturers in SA perceive the political environment as a hindrance to their operations and investment, indicating an increasing belief in the government’s ability to effect essential changes against a backdrop of political stabilisation. 

9. A test for fiscal discipline 

There is an urgent need for fiscally-responsible policies that can significantly reduce poverty, enhance health and education outcomes and stimulate economic growth all while avoiding exacerbating fiscal challenges. 

10. SA’s vulnerability to global instability 

Economic progress, despite a relatively stable domestic political environment with the recent establishment of the GNU, remains susceptible to global instability and market volatility, caused by geopolitics and economic slowdowns in key trading partners. 

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