Moody's lowers South Africa’s growth forecast to 1.5% amid global uncertainties

Moody’s Ratings agency has lowered South Africa’s growth forecast for 2025 on the back of expected slow global growth, driven by tariff uncertainty and trade tensions.

The ratings agency on Tuesday said South Africa’s gross domestic product (GDP) for 2025 will only grow by 1.5%, a 0.2 percentage points decrease from its previous forecast.

This growth forecast is in line with the 1.7% estimate from the SA Reserve Bank partly to subdued demand, and partly to lingering supply-side fragilities, but more optimistic than the downwardly revised 0.8% forecast by the International Monetary Fund last week.

In its Global Macro Outlook 2025-26 Update, Moody’s said global growth slowdown was underway as policy uncertainty added risks to the global economy.

“Policy uncertainty weighs on a global economy that was already slowing. Uncertainty surrounding global economic policies is likely to take a toll on consumer, business and financial activity,” Moody’s said. 

“Despite a pause and reduction in some tariffs, policy uncertainty and trade tensions — especially between the US and China — are likely to dampen global trade and investment with consequences across the G-20. 

“We lowered our global growth projections for 2025 and 2026. We expect US GDP growth to cool to 1% in 2025 and 1.5% in 2026 and China's real GDP growth to slow to 3.8% in 2025 and 3.9% in 2026. 

“We also cut growth forecasts for Canada, Mexico, Germany, France, Italy, the UK, Australia, Korea, Japan, India, Indonesia and South Africa.”

Moody’s said its forecast adjustments in this May 2025 update accounted for these effects on the global economy. 

While the final tariff rates have yet to be determined, Moody’s said a complete reversal to pre-April levels was unlikely. 

It noted that US Treasury Secretary Scott Bessent, in recent public commentary, reiterated the administration’s desire to bring back industrial activity and manufacturing jobs to the US. Bessent also framed US trade policy in the context of global imbalances, suggesting the administration’s policy push for a different trading regime and smaller US current account deficits will continue.

In addition, the administration sees tariffs, which tax imported goods, as a fiscal revenue generation tool. 

Moody’s said that in some sectors, US trade policies could bring select activities back on shore. However, it said that as long as US domestic savings were surpassed by investment, the tariffs were unlikely to close the US current account deficit, which reflects the country's saving and investment imbalances. 

“We expect tariffs to generate fiscal revenue, albeit unlikely to levels that would materially reduce the US fiscal deficit. The tariff increases on all countries — especially China — along with high sectoral tariffs on products such as steel and aluminum will weigh on global trade and investment decisions with considerable growth consequences for most G-20 economies,” Moody’s said. 

“The effects on trade are already visible in some data. In the first 20 days of April, Korea's export volumes fell by 5.2% compared with the same period last year. Although weekly shipment data are volatile, bookings from China to the US dropped sharply in the first three weeks of April and were only partially offset by increased bookings from other Asian economies.”

Moody’s said China’s growth outlook was clouded amid mounting trade tensions.

China’s real GDP grew by 5.4% year-on-year in the first quarter of 2025 on the back of a particularly strong boost from exports and the stabilizing impact of the government’s fiscal and monetary measures. 

“While tariffs in both directions between China and the US will likely be lowered, paving the way for negotiations, they will remain considerably restrictive. We therefore expect China's real GDP growth to decelerate in the coming quarters,” it said.

“As it has in the past, China will likely continue to implement fiscal stimulus to bolster growth. Regardless of the external environment, the government will continue to invest in industrial technological development, especially in new and green technologies of the future.”

BUSINESS REPORT