Enoch Godongwana predicts 1.2% economic growth for South Africa this year

Presenting the Medium-Term Budget Policy Statement in Parliament on Wednesday afternoon. Finance Minister Enoch Godongwana predicted economic growth for the year of 1.2%.

This, the minister said, is more than double the 0.8% seen last year. It is approximately in line with other predictions, although below initial estimates from earlier this year.

In May, National Treasury said gross domestic product (GDP) was forecast to grow at an average of 1.6% between 2025 and 2027, significantly lower than the 1.8% forecast two months prior.

Godongwana added that the “growth outlook strengthens moderately over the medium term. We now forecast real GDP growth will average 1.8 per cent between 2026 and 2028”.

The local economy only grew 0.8% in the second quarter of the year.

The minister added that “the structural reforms we have embarked on, particularly in energy and logistics, will be key to lifting our rate of growth closer to levels demanded by our developmental needs”.

Godongwana did note, however, that “it is critical that we leverage the immense opportunities presented by the sub-Saharan region”.

He said this on the back of global growth slowing due to US President Donald Trump’s tariffs.

In addition, “we continue to make progress in the implementation of the Africa Continental Free Trade Agreement to strengthen multilateralism and regional cooperation,” the minister said.

Experts have warned that South Africa risks a multiplier effect on export volumes to the US, given that the recently imposed 30% tariff is higher than that of rival exporters, making local products less competitive in the American market.

Donald MacKay, CEO of XA Global Trade Advisors, has said tariffs affect about 1.3% of South Africa’s gross domestic product.

In the middle of last month, Investec chief economist Annabel Bishop forecast faster growth next year as freight constraints ease and exports strengthen.

“For 2026, the IMF sees South Africa’s economic growth rate at 1.2% year-on-year, which is below our forecast of 1.5% year-on-year, as we continue to anticipate alleviations in the domestic freight crisis, driving faster export-led economic growth domestically,” Bishop said.

Domestically, South Africa’s data releases for the first half and third quarter of 2025 “are supportive” of 1% gross domestic product growth, said Bishop, which is in line with IMF’s figures.

Yet, South Africa lags emerging market and developing economies, which are projected to moderate to just above 4%, said the IMF.

“Overall, the IMF has lifted its economic forecasts for 2025, by 0.1 percentage points year-on-year for both emerging and advanced economies, compared to its forecasts made at its July WEO publication, and by more substantially since April,” Bishop noted.

Economists view growth of around 5% as required for sustainable job creation.

IOL Business