Economists predict that Gross Domestic Product (GDP) growth for 2025 will be close to 1.6 percent in 2025. File Picture : Henk Kruger, Independent Media
Economists predict that Gross Domestic Product (GDP) growth for 2025 will be close to 1.6 percent in 2025, the foundation of which was laid in 2024 with lower inflation and two interest rate cuts.
Inflation was below 3 percent at the end of 2024 and the South African Reserve Bank (Sarb) cut interest rates by 25 basis points in September and November. Rating agency S&P have also forecast a positive outlook for South Africa in 2025.
Waldo Krugell, an economics professor at North-West University said that he is optimistic about growth prospects in 2025 even though the GDP contraction in the third quarter slightly obscures the forecast a bit.
“Overall the current expectation is for growth of 1.5 or 1.6% next year. On the demand side we know some growth will come from household consumption spending with hopefully 3 more 25 basis repo rate cuts in 2025,” he said.
Professor Irrshad Kaseeram, from the University of Zululand's economics department, said GDP growth looks positive although a prediction of 3.3 percent growth by President Cyril Ramaphosa in 2025 is unlikely.
“A realistic projection will be between 1.5% to 2%. which is much higher than the growth for last year of about 1.05%. The major challenges SA faces is too little investment in infrastructure involving rail, road, harbour water and sanitation and electricity. These investments are critical in jump-starting the economy and attracting further investments.”
He added that with the new Trump government there are uncertainties regarding tariffs on BRICS countries, but especially with China, which is South Africa’s major trading partner for commodities.
“Should tariffs be imposed it will reduce demand for our exports,” he said.
Kaseeram said that although load shedding appears to be a thing of the past, there is no clear policy statement that it is indeed so. “Private public partnerships is a solution for most of these challenges and dealing with corruption and rent seeking behaviour is another important area.”
Kaseeram added that South Africa has a good macroeconomic outlook with low inflation and interest rates, which will boost business and consumer confidence thus increasing spending and investment. Hence my prediction of growth of at most 2%.
Professor Raymond Parsons an economist at the North-West University (NWU) said that compared to twelve months ago the table is set for better growth prospects for SA in 2025.
“The foundations for an economic recovery were laid in 2024 and South Africa must now capitalise on them this year. The economy ended last year with supportive factors such as less inflation, declining borrowing costs, an absence of load-shedding and positive business and consumer response to the formation of the Government National Unity (GNU).”
Parsons added that South Africa hosting the G20 this year is also a great opportunity to showcase its economy.
“On present evidence, the projections are now for about 0.6% growth in 2024 (instead of a previous estimate of around 1%) and about 1.6% in 2025 (instead of a previous projection of around 1.7%).
The keys to even better job-rich growth in 2025 lie in the GNU rapidly implementing further growth-friendly reform policies and SA attracting fresh investment capital.”
S&P in its Emerging Markets Sovereign Rating Trends 2025 report said that Africa saw more upgrades over 2024 than any other region globally.
“At present, five sovereigns in Africa (South Africa, Benin, Egypt, Morocco, and Togo) are on a positive outlook. South Africa’s Outlook Revised To Positive On Improved Reform And Growth Potential in Nov, 2024.
The positive outlook reflects the potential for stronger growth than we expect, alongside government debt stabilization, if the new coalition government can accelerate economic reforms while addressing infrastructure- and fiscal-related pressures,“ the rating agency said.
S&P added that they could raise the ratings if an improving track record of effective reforms resulted in structural strengthening of economic growth and reduced government debt and contingent liabilities.
Business Report
Related Topics: