Rounding off 2023: Some Commentary on the 4th Economic Quarter

Disclosure: This article is posted to inform readers and not to provide financial advice.

What is an Economic Review?

The economy is not an abstract concept with little relevance to you; rather, it is in direct interaction with multiple points of your life all the time, and in many ways influences how your life looks and your level of general wellbeing.

A quarterly economic review is a retrospective tool to get a gauge on the performance of global and local economies, the fourth quarter falling over the months October through December. Performance is decided by looking at factors such as GDP growth, inflation rates, employment figures, consumer spending, consumer confidence, consumer price index, trade balances amongst others.

By understanding how the economy works over time and how things change each quarter, you will be better prepared to make smart financial plans, for investments or savings.

In this TVC Economic Review we reflect back on the last quarter and recap what moved the markets in Q4 2023

Global and Local Markets in Brief

Economically, 2023 was saturated by incessant talk of how global economies were grappling with aggressive price-hike cycles, with this trend continuing into the last quarter. The fact that this remained a topic of conversation in the last quarter of the year made sense considering global inflation still sat at a rate of 5.0% in Q4, which is still high when you consider the aim of many central banks being around 2% to maintain price stability. Despite this, the still-in-place strict monetary policies in the last quarter and the continued uninspiring economic growth, the easing of certain price pressures (including the drop in commodity prices) meant that the possibility of some disinflation was within the realm of possibility. As you might expect, this “sniff of change” does not signal an overnight change in fortune for the world’s economies. This is especially true when core inflation remained above 2%, which led to central banks not being as open as one would hope to reconsidering maintaining high interest rates. 

Interestingly, global sentiment in the last quarter reflected more concern about geopolitical tensions’ impact on the economy than about inflation, interest rates, or recession. Which is a sea change from the dominating fear caused by the tag and pull between out-of-hand inflation and the worldwide raising of benchmark interest rates and all the uncertainty this caused. But in Q4 optimism emerged, leading to a market rally and a shift with developed markets outperforming emerging ones. 
On home ground (South Africa), economic challenges kept spirits down, with minimal growth and rising unemployment as the year closed. In 2024, we expect the economy to improve compared to last year’s 0.5% year-on-year growth. However, the overall growth projection for 2024 is still at 1.0% year-on-year.

Image source: Canva – Fear of Global Instability Amid Geopolitical Tension Trumps Recession Concerns

Global Economic Landscape

Emerging Markets Begin to Find Their Shine

Globally, emerging markets found their feet in 2023, and there are indications that they might come into their own even more in 2024 – watch this space as global powerhouses get reshuffled.

In fact, Q4 saw emerging economies rise by 8%, ending the year with a 21% return (excluding China), only slightly trailing behind developed markets’ 24% return. Even though their returns were lower than developed markets, they can still be said to have come out on a stronger note, as they were experiencing faster economic growth and rising demand — which tells a story of accelerated expansion — unlike developed markets which remained in contraction. This resilience is expected to hold, with developing economies expected to sustain stable growth at 4.0% in contrast to the slowdown in developed economies. One of the reasons that account for the divergence is less price pressures in developing economies, and a supportive environment in the generally more upbeat global investment mood. It is however a tentative growth as they still face challenges such as supply chain disruptions and high shipping costs.

Alongside this observable growth in both developing and developed economies, concerns persist about the global employment landscape. The global unemployment rate in Q4 2023 was 5.1%, showing a slight improvement from the previous year, but projections for 2024 anticipate a rise to 5.2%.

Optimism Peaks in the Final Hours: A Risk-On Rally in 2023’s Closing Quarter

Let’s return to the aforementioned change in tone we picked up in the last quarter. Q4 saw a risk-on-rally, a sense of hope, a situation where investors had more of an appetite for riskier assets because they were more optimistic. A lot of this optimism was spurred on by things that happened in the United States.

What specifically in the U.S.? A downturn in U.S. inflation and a pickup in economic growth from the previous quarter. Globally, the U.S. dollar’s status as a global benchmark currency and the importance of U.S. Treasury securities set all sorts of things in motion globally. Because of this, fluctuations in inflation and GDP in this region directly influence international investors’ sentiments, lower bond yields (good because: reduces borrowing costs, increases bond prices, and can stimulate investment while providing stability to investment portfolios), and instigating a rally in stocks and bonds globally – which is exactly what happened in Q4.

Another cause of this positive rallying (with its origins in the US) were statements from Federal Reserve officials and Jerome Powell’s press conference remarks. Both echoed a much quoted willingness to support economic growth through measures like lowering interest rates and other forms of economic stimulus – remarks referred to as “dovish” (accommodating), counter to their aggressive approach to monetary policy up until now. The market was highly responsive to this optimism, immediately reflected in market repricing.

This market repricing saw nearly all asset classes – stocks, bonds, commodities – produce positive returns. Returns that were higher than the rate of inflation. These returns did better than holding cash – an often low yielding but safe option – and even cash had its own celebratory returns not seen since before the Global Financial Crisis.

What the returns on this optimism look like in numbers:

  • MSCI World index (stock market in developed countries): surged by 23.8% when measured in U.S. dollars (USD). A strong performance.
  • Global Emerging Markets (growth potential within emerging economies): respectable 9.8% increase. A positive performance for investments in emerging economies.
  • Global Government Bonds also saw gains of 4.0%.
  • Credit markets significantly outperformed risk-free government bonds, with US investment-grade corporate bonds rising by 8.5%, US high yield bonds by 13.4%, and Emerging Market bonds by 10.3%.
  • Gold hit an all-time high in USD terms, yielding a return of 13.1%. 
  • The final quarter of the year was a very positive one for fixed income markets, marking their best quarterly performance in over two decades, according to the Bloomberg Global Aggregate indices.

Commodity Blues

One area which was not as boyed up in quarter 4 was commodities. But flagging commodities might be a bit of a balm for inflation, making central banks possibly reconsider high interest rates – we wait with bated breath. 

This decline in commodities was reflected by a decline in the S&P GSCI Index, a measure of the performance of a wide range of commodities, including energy, agriculture, metals, and livestock. This decline happened despite price gains of some industrial metals and precious metals; the stumbling blocks being a weakness in agriculture, energy, and livestock commodities.

Predictably, as would happen during a positive but uncertain time, gold and silver performed strongly during the quarter, serving as safe-haven assets amidst economic uncertainty. Looking ahead to 2024, gold appears poised for further gains, driven by factors such as falling interest rates and geopolitical unrest. However, volatility is expected to remain high across all asset classes, making active trading a potentially rewarding strategy.

Natural Gas and Crude Oil Price Drops

Turning our attention to the most closely watched and fiercely contested commodities in the world, global natural gas and crude oil prices dropped despite OPEC+ trying to produce less. An illustration of classic supply and demand principles were at play. Prices in Europe and Asia went up a bit but were still much lower than the year before. Looking ahead, prices are expected to stay low in Europe and rise a bit in the US. 

Global energy prices are expected to trend downwards into 2024 due to slowing global energy demand. Factors contributing to this trend include tighter financial conditions, a real estate crunch, and moderate economic growth in China. However, geopolitical risks – such as conflicts in the Middle East – could lead to supply disruptions and increase price volatility.

What could this mean?

Firstly, lower oil and gas prices could potentially translate to reduced costs for industries reliant on energy, such as manufacturing and transportation, which could positively impact their bottom line. Additionally, lower energy prices may contribute to lower inflationary pressures domestically, which could influence monetary policy decisions by the South African Reserve Bank. Depending how things swing, it could even mean more disposable income in your wallet!

Digital Assets: Assessing Crypto’s Continued Relevance

Moving from traditional commodities to digital assets, the global financial landscape is changing and it is a good idea to keep up. While natural gas and crude oil remain significant, digital assets are reshaping how we view and handle value. Many have been on the fence about digital assets. Interestingly, in late 2023, digital currencies, such as Bitcoin and Ethereum, made a strong comeback (from the clutches of scandal and collapse), adding up to yearly returns of 155% and 91% respectively. Other digital currencies, like Solana and Avalanche, also saw significant increases, with returns reaching up to 917% and 254% for the year. These gains were fueled by expectations that a Bitcoin investment fund in the US might get approved. Additionally, improvements in trading infrastructure and regulatory clarity contributed to the positive sentiment surrounding digital assets.

Global Trade Trends

The momentum felt by crypto currencies was not as present in global trade. 

G20 merchandise trade growth stagnated after a period of decline. This decline is referring to the trend in the volume or value of goods traded across borders within this group of major economies. Basically there was little change in exports and imports compared to the previous quarter.

While year-on-year variations remained negative, the decline in demand for goods approached zero (a good thing), suggesting a stabilisation in global demand for goods. Additionally, the Purchasing Managers Index (PMI), a special measure for how manufacturing is doing, saw improvement in the manufacturing industry and export orders towards the end of 2023, albeit still below the critical threshold of 50. A continuation of this trend could signal investment opportunities!

Other than manufacturing, services trade across countries showed moderate growth, with exports and imports rising by 1.6% and 1.3%, respectively. Despite the overall contraction in merchandise trade for 2023, services trade continued to expand. This too presents opportunities for investment, but also, it just makes us feel like the economy is getting stronger.

Geopolitical instability

The conflicts in the Middle East, underscored the fragility of global stability and its potential impact on trade dynamics. Especially the Israel-Gaza conflict and Yemen (Houthi) attacks, have the potential to trigger a global economic recession by escalating energy costs and disrupting trade routes. Specific countries like Egypt, Indonesia, India, and Lebanon are facing economic challenges, including reduced tourism revenue, increased raw material expenses, higher import costs, and damage to vital agricultural sectors.

Image source: CanvaG20 merchandise trade growth stagnated after a period of decline.

Region Specific Developments

  • US: GDP grew by 3.3% in Q4 2023, with inflation at 2%.
  • Eurozone: GDP remained stable, with a 0.3% increase in employment.
  • UK: Equities saw growth amid moderated inflation.
  • Japan: Market ended positively, with strong corporate fundamentals.
  • Asia (ex Japan): Equities gained traction, especially in Taiwan, South Korea, and India.
  • Emerging Markets: Showed strength with Poland, Peru, Egypt, and Mexico performing well.

Local Landscape

Our economy can be safely said to have ended off the year in bad shape. Our overall GDP growth for 2023 was modest at 0.6%, below the previous year’s level. And, although some growth occurred in the last stretch, it was by 0,1% (up from a contraction of 0,2% in the third quarter). This number was not even able to keep up with population growth, which puts us firmly in economic stagnation. But, perhaps important to add, this does not result in a technical recession – which would have happened had we seen another contraction. The little growth that did occur can be partially attributed to a 0,2% increase in household spending and a not-as-rapid decline in fixed investment from the private sector.

Further, the sectors that helped keep as peddling water and not entering recession included the transport, storage, and communication industry, which expanded by 2.9%; the mining and quarrying industry, which increased by 2.4%; personal services industry, with a 0.9% increase; and the finance, real estate, and business services industry, which grew by 0.6%. Our stock market also performed well during the fourth quarter (Q4), as indicated by the 6.9% increase in the FTSE/JSE All Share Index.

The industries that acted as a ball-and-chain were: ​​the trade, catering, and accommodation industries which experienced a decrease of 2.9%, contributing negatively to GDP growth. In addition, agriculture (a very important sector for jobs), forestry, and fishing industries contracted significantly by 9.7%.

There were, nonetheless, notable bright spots in the economy, including an increase in household spending – a saving grace, particularly in non-traditional categories such as expenditure abroad. Expenditure abroad has a positive impact on HFCE growth. This means that despite some money leaving the domestic economy to be spent internationally, the overall effect is beneficial for domestic consumption. With this increase in spending we also saw a decrease in domestic spending by to 0.3% in final consumption expenditure by the general government. This decline was primarily driven by reductions in purchases of goods and services, as well as compensation of employees within the government sector. Despite this positive trend, there were challenges in other sectors, notably in trade.

Trade Imbalance at Play

The end of the year saw South Africa’s current account deficit surge to ZAR 165.5 billion, marking a significant increase from the previous period and surpassing market expectations, highlighting how vulnerable the local economy is. The trade surplus narrowed, driven by a notable increase in imports of crude oil and refined petroleum products, making it increasingly challenging to envision achieving a balanced trade position (the elusive ideal where we would neither accumulate nor deplete foreign reserves). Despite some growth in exports, particularly in fruit and manufacturing products, the economy faced challenges, including declining sales of high-value items like pearls and semi-precious stones.

However, the trade deficit was not the sole contributor to the overall economic imbalance. The widening deficit in services, income, and current transfers (notably in the primary income account) exacerbated the situation. As a result, the current account deficit widened to 2.3% of GDP in Q4 from 0.5% in Q3, indicating a deteriorating balance.

In simple terms, these situations indicate that the country’s overall economic balance is worsening because it’s either earning less from abroad or spending more on international transactions. While these economic imbalances have far-reaching consequences, perhaps none are as pressing as the impact on employment.


A widening portion of the labour force pool being unemployed is the elephant in the room in South Africa. In Q4 2023, there was a 0.2 percentage point increase in the unemployment rate, which reached 32.1%. During this period, investors observed changes in industry employment patterns. Some sectors experienced significant job losses, such as community and social services, construction, and agriculture. However, there were gains in other sectors like finance, transport, and mining, indicating shifts in employment dynamics across various industries.

“…the job market is hard at the moment”

The number of people who were employed decreased by 22,000 compared to the previous quarter, totaling 16.7 million. However, the number of unemployed persons increased by 46,000 to reach 7.9 million. This led to an official unemployment rate increase from 31.9% to 32.1%. 

Amidst these concerning trends in employment, the focus on economic indicators like inflation becomes paramount, as they directly influence policy decisions.

Monetary Policy

The art of managing inflation while not killing economic growth has been the dance for monetary policy throughout 2023. The inflation rate eased to 5.5% in November, staying within the SARB’s target range of 3%-6% – even though this inflation figure is pushing the upper boundaries of this target range. This was given more attention due to the fact that there was some relief in core inflation as well. In response, SARB chose to keep its key repo rate unchanged at 8.25% extending a pause on tightening cycle, maintaining borrowing costs at their highest since 2009. Despite headline inflation slightly easing to 5.1% in December, it remained above the central bank’s target range of 3-6%. The tone remains cautious. As policymakers grapple with the intricacies of monetary policy in an effort to strike a delicate balance between inflation control and economic stimulation, load shedding continues to exert pressure on the nation.

Load Shedding

Our lights were on for slightly longer in the 4th quarter. Nonetheless, despite the 45% decrease in power shortages, load shedding still heavily affected industries such as wholesale, retail, and vehicle sales. Some culprits? underlying energy issues, ongoing planned maintenance and operational difficulties at Transnet. Some imoves to solve this include initiatives like the Renewable Independent Power Producer Programme (REIPPP) and Transnet’s Recovery Plan, renewed constraints remains still rife. Surpringsinly, consumer confidence has been slightly easygoing aided by more solar usage. Energy challenges have been contrasted with a rand that was resilient, a good sign for local currency markets.

Local Currency Markets

SA rand closed the quarter at R18.28/USD, down from R18.92/USD at the end of Q3. This could allow for reduced costs for imports denominated in dollars, potential impacts on investment returns for both domestic and foreign investors, and considerations for export competitiveness.


The SA real estate market experienced a 17% year-on-year drop in property transactions (post high interest rates). In turn, there was only marginal house price appreciation across the country. Although Western Cape property trends are a bit of an outlier with positive performance, strong semi-gration trends.

Household Strain

You might catch yourself thinking: Where is my salary going? So little food for so much? Eggs were apparently 38% more expensive than a year ago and potatoes 51,9% more expensive! Although the consumer price index eased slightly over this quarter (influenced by cheaper fuel) we have not magicked away the elevated interest rates and soaring inflation which continued to place strain on South African households, factors that continue to erode disposable income and consumer confidence. Rising food inflation and currency depreciation are felt in very real ways as a citizen in South Africa.

Turning our attention to domestic economic indicators, the first quarter of 2024 brought a notable development in South Africa’s consumer sentiment. According to the FNB/BER Consumer Confidence Index, confidence edged up to -15 from -17 in the previous quarter, marking the highest level in five quarters.

Further, South Africans faced added complexity to their financial challenges as a significant portion of their income went towards debt repayments, leading to concerning debt-to-income ratios (despite efforts like debt counselling) exacerbating the situation.

Seeing the back of 2023, 2024 holds some hope. South Africa’s economy sees various sectors pushing for growth, including tourist accommodation, restaurants, catering, fast food, rail and road transport, and manufacturing, signalling resilience and potential for recovery.

Remembering the basics, some takeaways:

  • Jobs drive economy: More jobs boost spending, powering the economy.
  • Inflation matters: Price changes affect buying power and investment decisions.
  • Watch for warning signs: Financial flips signal potential trouble ahead.
  • Banks call the shots: Interest rate moves impact borrowing costs and savings returns.
  • Stay flexible: Adapt investments to economic shifts.
  • Interest rates can be slow: Changes take time to influence spending and housing.
  • Consumers keep going: Spending persists even amid price hikes with savings.
  • Look to different sources of info: Surveys may not reflect actual economic conditions.
  • Rules matter: Government decisions impact housing costs and consumer spending.
  • Be aware of world events: Global happenings influence local economies.

Long-term (global) economic outlook

All is not lost. Global real GDP projections for 2024 and 2025 have an anticipated growth of 3% and 3.1% respectively and improvements are noted in important regions.

Get in Contact

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