National Treasury expects South Africa’s economy to grow by some 1.2% this year – marginally down from the 1.4% forecasted in the 2025 Budget.
This according to the Medium Term Budget Policy Statement (MTBPS) released by National Treasury on Wednesday.
The department noted that the outlook reflects a moderate improvement with steady progress in structural economic reforms.
“Government is meeting its fiscal targets and continued strengthening of macroeconomic stability will increase confidence and reduce borrowing costs across the economy, helping to revive investment and employment.
“Over the past year, domestic growth has been affected by greater global uncertainty and volatility, logistical constraints and low levels of business and consumer confidence.
“However, inflation has fallen, and together with prudent fiscal policy, this has reduced the risk premium – the additional return that investors demand to hold South African assets. As a result, borrowing costs have declined and growth prospects have improved,” the department noted.
The real Gross Domestic Product (GDP) is expected to reach some 1.2% in the same period – also reduced from the 1.4% in Budget 2025.
“The revision reflects weaker growth outcomes in the first half of the year, a subdued external environment and low levels of consumer and business confidence.
“Household consumption remained resilient, supported by moderating inflation, lower interest rates and improved credit conditions, but weaker investment, state spending and exports tempered overall expenditure growth,” National Treasury noted.
Over the medium term, however, GDP is expected to average some 1.8%.
“Investment is expected to strengthen over the medium term as measures to lift infrastructure spending take effect and reform implementation gains traction.
“Investment will also benefit from the reduced cost of capital, supported by lower interest rates and the country’s improving risk premium,” said Treasury.
Risks to domestic growth are on the downside.
“Further delays in implementing reforms, particularly in energy and logistics, would impede much-needed growth-enabling investment.
“Conversely, lower inflation and interest rates, and improvements in infrastructure spending would support higher growth,” the department said.
Government has focused the economic growth strategy on four elements: maintaining macroeconomic stability, implementing structural reforms, building state capability and supporting public infrastructure investment.
National Treasury emphasised that raising the growth trajectory “depends on continuing to strengthen macroeconomic stability, accelerating structural reforms, building a capable state and improving public-sector infrastructure investment”.
“Progress is evident but delays in key structural reforms have held back investment, limiting potential opportunities offered by resilience in the global economy.
“This underscores the importance of continued efforts to improve policy certainty, deal decisively with economic blockages and bolster capacity in infrastructure and service delivery,” it said.
A look abroad
On the global front, growth is expected to slow to 3.2% in 2025 with the outlook weaker than a year ago due to tariff shocks and geopolitical challenges.
“Tariffs have not risen as sharply as expected when the US administration made its announcements in April of this year. However, the delayed price effects of such measures, growing protectionism and supply chain disruptions may increase costs, reduce productivity growth and weigh on medium-term economic growth.
“The prospect of higher tariffs buoyed trade in the first half of the year as companies brought forward imports and exports, but this is expected to wane over the remainder of 2025 – as is the impact of deficit spending in advanced economies.
“Global inflation is expected to continue easing over the next two years, led by lower energy and food prices. However, renewed trade disruptions, higher energy costs or the delayed effects of tariff measures could increase price pressures,” Treasury noted. – SAnews.gov.za
