Africa-Press – South-Africa. Economists at Nedbank have raised their economic growth expectations for South Africa in 2025 following better-than-expected numbers in the second quarter.
Countering the continual decline in GDP expectations from various economists and analysts this year, Nedbank now believes South Africa will hit 1.2% GDP growth for 2025, up from previous forecasts of 1%.
While this is still anemic and not nearly enough to meet the rising population and cultivate the necessary business expansion to cut unemployment, it is still a big turn in the right direction.
Many economic forecasts for 2025 started the year expecting around 1.5% GDP growth, with positive sentiment from the tail-end of 2024 pushing hope for even upwards of 2%.
This bullish outlook was quickly cut down at the commencement of the second Trump administration in the United States in February, which was quickly followed by market chaos and a hard reset on global trade.
Trump’s Washington also targeted South Africa specifically, attempting to make the country a pariah over its empowerment policies and the government’s failings in corruption, safety, and security.
In the new framework, which includes 30% tariffs on South African exports to the United States, it was difficult to see a positive for the economy, and GDP forecasts quickly moved from 1.5% to sub-1%.
Even though no commentators saw a recession on the cards, the general consensus was that South Africa’s GDP would only expand by between 0.5% and 0.8% in 2025, adding another year of economic stagnation.
South Africa’s economic growth has averaged around 0.7% a year for the last decade.
Following negligible growth of 0.1% in the first quarter of the year, markets anticipated a stronger, but still flat increase of 0.5% in the second quarter.
However, pushing back the downbeat expectations, South Africa managed 0.8% growth, surprising many.
Nedbank now believes that this has changed the picture for the full year, somewhat, pushing expectations in a more positive direction.
What is helping South Africa grow
Nedbank chief economist, Nicky Weimar
According to the group’s economists, the economic recovery seen in the second quarter is likely to continue into the third and fourth quarters. However, the risks are still to the downside.
Helping the economy along are a relatively stable power supply, slight improvements in logistics, and firmer domestic demand. This will underpin activity in most industries, Nedbank said, boosting production.
While water and electricity systems remain vulneranble, the bank said that progress on the energy front and the moderaton of load shedding can’t be ignored.
Agriculture will remain a bright spot due to favourable weather conditions, resilient yields and optimistic farmer sentiment, even as challenges in livestock and trade risks linger, it said.
Consumer sectors like retail, tourism and financial services are expected to gain firmer traction as incomes improve and credit demand picks up. Consumer spending will likely continue carrying the weight.
Hindering growth is weaker global demand, hurt by increased protectionism and heightened policy uncertainty, which will likely weigh on export-oriented sectors.
Mining and manufacturing will be hit particularly hard due to weak global growth, trade tensions and logistical bottlenecks, the bank said.
“Construction, meanwhile, will stay subdued, held back by regulatory inefficiencies, still lingering jitters about the stability of the GNU, and weak business confidence,” the economists said.
While household spending will remain resilient, growth will partly be contained by fragile consumer confidence, which is hurt by escalating concerns about the job market.
This could prompt households to be more cautious about spending, Nedbank said.
Overall, the picture looks a bit better for South Africa, with the bank expecting growth to increase to 1.2% in 2025 and moving to an average of 1.5% over the next three years.
But this comes with two big caveats. Firstly, even the improved forecast is still very low, and not enough to meaningfully improve lives in South Africa.
Secondly, there are multiple risks to the downside that could impact this and drag the forecast back down.
Sentiment in industries exposed to US tariffs will likely deteriorate, prompting some companies to scale down operations and withhold capital investment.
Government spending, while likely to increase marginally during the remainder of this year, will be limited by budget constraints.
The drag from global conditions will likely intensify, with South Africa losing out from a subdued commodities market, the US tariffs and the very likely end of AGOA.
Source: businesstech
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