Macroeconomi Trends in South Africa : June 2025 Edition

In the first quarter of 2025, South Africa's economy showed mixed macroeconomic trends. The national budget presented in May revised the GDP growth forecast for the year downward from 1.9 per cent to 1.4 per cent, citing global trade tensions and domestic structural challenges. Despite this, the government aims to stabilize public debt at 77.4 per cent of GDP and achieve a primary budget surplus of 0.8 per cent – the first sustained surplus since the 2000s. Over R1 trillion is earmarked for infrastructure investment, with a continued focus on social spending, which will account for over 60 per cent of consolidated expenditure.

Economic growth in Q1: 2025 was modest, at 0.1 per cent, with agriculture being the standout performer, growing by 15.8 per cent. Other sectors like transport, finance, and trade also contributed positively, while manufacturing, mining, and construction contracted. On the demand side, household consumption rose, but government spending and investment declined. Unemployment increased to 32.9 per cent in Q1, with 291,000 jobs lost – the first Q1 employment decline since 2022. Job losses were concentrated in trade, construction, and mining, while transport and finance saw gains. Youth unemployment remained high, with 37 per cent of those aged 15-24 not in employment, education, or training. Expanded unemployment also rose to 43.1 per cent, with most provinces experiencing job losses.

Inflation remained subdued, with the annual rate at 2.8 per cent in April, slightly up from March but still below the South African Reserve Bank’s (SARB) target range of 3-6 per cent. This low inflation environment prompted the SARB to reduce the repo rate to 7.25 per cent in May, continuing a monetary easing cycle that began in late 2024. The central bank is also considering a lower inflation target, which could pave the way for sustainably lower interest rates, though it acknowledges potential short-term trade-offs in growth.

Overall, despite the downward trend in inflation and interest rates, economic growth remains fragile, and unemployment persists at high levels, highlighting the urgent need for targeted investment and sustained structural reforms to support recovery. While President Ramaphosa’s visit to Washington appears to have strengthened communication channels with the US government, uncertainty still looms over whether a trade agreement between South Africa and the US will be finalized before the July 1st deadline, which would otherwise trigger the reimposition of reciprocal tariffs.