South Africa GDP Growth Preview: Moderate Growth Will Resume in Q2
Bottom line: Department of Statistics of South Africa (Stats SA) will announce Q2 GDP growth on September 3, and we expect that South African economy will likely grow by around 1.0%-1.2% YoY in Q2 2025. We think that the growth momentum will continue to be supported by low inflation and interest rate cuts in Q2 despite the return of power cuts (loadshedding) late March coupled with uncertain global environment would be downside factors.
Figure 1: GDP Growth Rate (%, YoY), Q4 2021 – Q1 2025
Source: Continuum Economics
Department of Statistics of South Africa (Stats SA) will announce Q2 GDP growth on September 3 and we expect that South African economy will likely grow by around 1.0%-1.2% YoY in Q2 2025.
Despite the growth was partly fuelled by suspended loadshedding in Q1, the return of the power cuts as of late March is worrisome for the growth trajectory. South Africa’s national electricity utility company, Eskom announced that Stage 2-3 loadshedding was implemented in April and May. Despite concerns, Eskom recently reported that the power system is showing resilience in meeting the winter electricity demand due to ongoing structural improvements in the generation fleet, and announced that there has been no load shedding since May 15, with only 26 hours recorded between April 1 and July 31.
South Africa's Purchasing Managers' Index (PMI) demonstrated signs of a rebound in Q2, following a slump in Q1, with May's PMI reaching a four-year high of 50.8. The recovery was driven by increased domestic orders and improved supply chain conditions, although export orders declined, and cost pressures intensified.
On the trade front, the country reported a significant trade surplus of ZAR 22.0 billion in June. This positive net exports figure was supported by robust agricultural exports, although the overall merchandise trade surplus slightly decreased from Q1 to Q2. Despite good Q2 figures, 30% additional tariffs on South African exports will be a matter of concern the rest of 2025.
It is worth noting that South African Reserve Bank (SARB) recently revised its GDP growth prediction for 2025 to 0.9% YoY from 1.0% YoY in SARB’s July 2025 policy statement. This revised forecast reflects a weak GDP data from Q1 and anticipates negative impacts from higher U.S. tariffs on South African exports. We continue to assess the economy will grow by 1.2% in 2025 supported by improved consumer sentiment, low inflation, and interest rate cuts despite power cuts coupled with uncertain global environment, geopolitical tensions, U.S. tariffs and slowing global demand will be important downside risk factors.