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Economic growth

S&P Downgrades South Africa's Economic Growth Forecast

Strategic Insights

— 2 min read

S&P Global Ratings has downgraded South Africa's economic growth forecast for 2025 following a subdued gross domestic product (GDP) print in the first quarter, expanding by a marginal 0.1% compared with the fourth quarter of 2024. This lackluster performance was attributed to negative gains in six of the 10 industries on the production (supply) side of the economy, with mining and manufacturing being the biggest drags. The return of load shedding after a 310-day hiatus and a 2.6% decline in electricity, gas, and water also contributed to the decline. S&P has lowered their growth projection for South Africa by 20 basis points (0.2 percentage points) to 1.1% from 1.3% previously.

Key Takeaways:

  • S&P has downgraded South Africa's economic growth forecast for 2025 to 1.1% from 1.3% previously, citing weaker-than-expected activity so far this year.
  • The economy expanded by a marginal 0.1% in the first quarter of 2025 compared to the fourth quarter of 2024, with mining and manufacturing being the biggest drags.
  • Return of load shedding after a 310-day hiatus and a 2.6% decline in electricity, gas, and water contributed to the decline.
  • S&P has revised their 2025 GDP growth projection due to weaker-than-expected GDP print, fading impact of a recovery in agricultural output, and reduced boost to consumption from the Two-Pot retirement system.
  • The South African Reserve Bank's latest projection of 1.2% growth this year is expected to rise to 1.8% by 2027, amid declining mining and manufacturing output and rising unemployment.
  • Operation Vulindlela, a joint initiative of the Presidency and National Treasury, will accelerate the implementation of structural reforms and support economic recovery by modernizing network industries.
  • Anchor Capital economist Casey Sprake reiterated that GDP growth was just 0.1% quarter-on-quarter in the first three months of the year amid persistently weak business confidence, policy uncertainty, and low fixed investment.
  • S&P also warned that growth will be limited by potential US tariffs and global tariff-related risks, both directly and indirectly, via slowing demand from China for key commodities.

Statistics:

  • 0.1%: The marginal growth in the South African economy in the first quarter of 2025 compared to the fourth quarter of 2024.
  • 4.1%: The decline in mining activity in the first quarter, with platinum group metals being the most significant negative contributor.
  • 2.6%: The decline in electricity, gas, and water in the first quarter, marking the largest contraction since the third quarter of 2022.
  • 20 basis points: The downward revision in S&P's 2025 GDP growth projection for South Africa.
  • 1.1%: The revised 2025 GDP growth projection for South Africa.
  • 1.3%: The previously forecast 2025 GDP growth projection for South Africa.
  • 1.2%: The South African Reserve Bank's latest projection of growth this year.
  • 1.8%: The South African Reserve Bank's projection of growth by 2027.
  • 20 basis points: The upward revision in S&P's 2025 GDP growth projections for emerging markets, excluding China.

Sources:

  • S&P Global Ratings
  • The South African Reserve Bank
  • Presidency of South Africa
  • National Treasury of South Africa
  • Anchor Capital
  • Bloomberg

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