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.
The South African economy kept its head above water in the first quarter of 2025, expanding by a marginal 0.1% compared with the fourth quarter of 2024.
Six of the 10 industries on the production (supply) side of the economy recorded negative gains, with mining and manufacturing being the biggest drags in the first quarter.
Mining weakened by 4.1%, with platinum group metals the most significant negative contributor. Coal, chromium ore, gold, copper and nickel also disappointed. Iron ore, manganese ore and diamonds recorded gains, but not enough to lift the industry into positive territory.
Manufacturing activity also slowed on the back of weaker production levels for petroleum and chemicals, food and beverages, and motor vehicles and other transport equipment.
After a 310-day hiatus, load shedding returned in the first quarter. This contributed to a 2.6% decline in electricity, gas, and water, marking the largest contraction since the third quarter of 2022.
S&P emerging markets chief economist, Elijah Oliveros-Rosen, said on Wednesday that they had lowered their growth projection for South Africa by 20 basis points (0.2 percentage points), mainly due to weaker-than expected activity so far this year.
“We revised our 2025 GDP growth projection for South Africa to 1.1% from 1.3% previously due to weaker-than-expected GDP print,” Oliveros-Rosen said.
“The initial positive impact of a recovery in agricultural output late last year is fading, as well as the boost to consumption from the introduction of a Two-Pot retirement system. For those reasons, we expect growth to remain relatively muted in the remainder of 2025.”
This S&P growth forecast is in line with the South African Reserve Bank’s latest projection of 1.2% this year, which is expected to rise to 1.8% by 2027, amid declining mining and manufacturing output and rising unemployment.
Answering oral questions in the National Council of Provinces on Wednesday, President Cyril Ramaphosa said the government needed to grow the economy at a much faster rate if it was to make inroads in the longstanding unemployment challenge.
“That is why we are moving forward with our far-reaching economic reform programme through Operation Vulindlela, and deepening collaboration across government, business, and civil society to deliver at greater scale and with greater impact,” Ramaphosa said.
Operation Vulindlela is a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic recovery by modernising and transforming network industries, including electricity, water, transport and digital communications.
After the tabling of the National Budget last month, S&P projected real GDP growth to pick up slightly to 1.3% this year from 0.6% in fiscal 2024, saying more private sector-driven electricity supply was coming onstream and last year’s drought was not repeated.
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.
“Structural reforms, particularly those under the newly launched Operation Vulindlela II, must urgently gain traction if South Africa is to shift from stagnation to inclusive, job-rich growth,” Sprake said.
However, S&P had warned that growth will be limited by potential US tariffs and global tariff-related risks, both via direct and secondary effects such as slowing demand from China for key commodities.
In the third quarter’s economic outlook for emerging markets published on Wednesday, Oliveros-Rosen said while tariffs’ direct impact was modest so far on emerging markets, they expected the indirect impact – slower global demand and softer investment due to trade policy uncertainty – to become more noticeable in the coming quarters.
Oliveros-Rosen said significant downside risks included 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 emerging markets.
“We have revised up our 2025 GDP growth projections for most emerging markets (from our April update), in large part due to less severe US tariff assumptions. Our 2025 real GDP growth forecast for emerging markets excluding China is 20 basis points higher for 2025, at 4.2%,” S&P said.
“We made the largest upward revisions to Argentina, Brazil, and Peru (40 basis points each), driven by a less adverse US tariff profile and stronger-than-expected growth in the first quarter. For most of the other emerging markets, our upward 2025 growth revisions were by about 20 basis points.”
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