Bianke Neethling
Africa-Press – South-Africa. Ratings agency S&P Global has revised its expectations for South Africa’s economic growth in 2025 down following the country’s weaker-than-expected growth in the first quarter.
In a recent economic commentary released on Tuesday, 24 June 2025, S&P said it lowered its expected growth rate for South Africa by 20 basis points from 1.3% previously to 1.1%.
The firm explained that this was mainly due to weaker-than-expected activity in South Africa so far this year.
In the first quarter of 2025, South Africa’s GDP growth was a modest 0.1% quarter-on-quarter and 0.8% year-on-year.
Stats SA revealed that most sectors, particularly the productive ones such as construction, mining, and manufacturing, recorded contractions in the first quarter.
S&P explained that the initial positive impact of a recovery in South Africa’s agricultural output late last year is fading, as well as the boost to consumption from introducing the two-pot retirement system.
“For those reasons, we expect growth to remain relatively muted in the remainder of 2025,” the firm said.
S&P also explained that the impact of the United States’ tariffs on emerging market (EM) economies, such as South Africa, remains uncertain.
The firm stated that there is a high degree of unpredictability surrounding the US administration’s policy implementation and potential responses, particularly with regard to tariffs.
This also leaves uncertainty around the potential effect on economies, supply chains, and credit conditions worldwide.
“As a result, our baseline forecasts carry a significant amount of uncertainty, magnified by ongoing regional geopolitical conflicts,” the firm said.
While the impact is still uncertain, S&P said the direct effects of shifting US trade policy on economic growth in EMs have so far been modest amid lower-than-feared tariff levels.
The firm expects the indirect impact of tariffs, namely slower global demand and softer investment due to trade policy uncertainty, to become more noticeable in the coming quarters.
However, positively, it said a weaker US dollar will encourage most EM central banks to continue lowering interest rates, partially cushioning the impact of US trade policy uncertainty.
The firm warned that there are significant downside risks to its growth outlook for EMs, such as the potential for higher oil prices amid the escalation of the conflict in Iran.
A weaker-than-expected US economy, more upside pressure on long-term US treasury yields, and challenging fiscal dynamics across several EMs will likely also play a role.
The graph below shows the changes in S&P’s growth expectations for South Africa and other EM economies from May to June.
Lower growth expected
S&P is joining a host of other institutions that have lowered their growth expectations for South Africa following the country’s weaker-than-expected first-quarter GDP growth.
The National Treasury said in its May 2025 Budget that it expects growth of only 1.4% in 2025, while the Reserve Bank has lowered its expectations to 1.2%.
FNB has also revised its 2025 growth forecast down to 1.0%, from 1.3% previously. The bank’s economists attributed this to prevailing weakness in private sector investment and subdued business confidence.
“Investment remains subdued as a share of GDP, reflecting a weaker investment climate amid persistent macroeconomic and policy uncertainty,” FNB said.
“The benefits of the economic reforms implemented thus far are taking longer to materialise, as evidenced by the continued weakness in fixed investment.”
Private sector fixed investment remains constrained at around 10.1% of GDP, well below the 15.7% recorded at the end of 2008.
The bank said export volumes also remained subdued, constrained by a challenging external environment and persistent domestic logistical bottlenecks.
“This is reflected in real net exports remaining in deficit since the beginning of 2011, excluding the pandemic year of 2020,” it said.
Exports accounted for 27.8% of GDP in 2024, down from 30.1% in 2007, indicating subdued export-led growth.
“The outlook for exports remains clouded by ongoing global tariff uncertainty,” the bank said.
“It will be critical for the Government of National Unity (GNU), alongside exporting businesses, to strengthen trade relations with existing major partners while exploring new export markets.”
Source: dailyinvestor
For More News And Analysis About South-Africa Follow Africa-Press
