South Africa’s economic growth for 2025 could rise to nearly 2% but economists and investors have warned that volatility lay ahead as a result of “Trump policy risk”, which may result in higher consumer inflation and a ramping up of monetary policy.
In its 2025 Economic Outlook on Thursday, specialist wealth management Citadel said while the US President Donald Trump’s return to the White House may cause market and currency jitters, South Africa must focus on more fundamental local factors it can control to strengthen the economy.
“Right now, Trump policy is the biggest known-unknown of 2025. The big question around US policy is whether the bark is bigger than the bite. What we do have control over is how we manage the systemic issues in the SA economy – and this is where our new Government of National Unity (GNU) needs to act,” said Citadel portfolio manager, Mike van der Westhuizen.
“The Trump comeback will likely bring back unusual and ambiguous methods of announcing decisions which will heighten volatility. This calls for well-diversified portfolios and good tactical asset allocation and stock selection. Volatility presents an opportunity. This year will favour those who manage risk well.”
Van der Westhuizen said South Africa’s economic growth was expected to average around 1.8% per annum over the coming years, but growth closer to 3% was required to sustainably grow the country out of its unemployment crisis and shaky but improving fiscal position.
“To turn the tanker around, it is time for the massive uplift in sentiment towards the new GNU to be turned into real action. While many departments are sailing ahead with new and improved initiatives, actual economic progress has been mediocre. Government must now start walking the talk in a more meaningful and impactful way,” he said.
“In terms of energy security, the break in loadshedding has been an immense tailwind. More needs to be done to ensure longer-term energy security. Fixing the rail and port issues is critical to our export sector and has cost foregone trade revenue.
“Other issues like water security and decay at municipality level are also problems that require urgent attention. Policy execution has hamstrung progress in the past and the GNU now has the perfect opportunity to prove the doubters wrong.”
Meanwhile, PwC said while it was expected that the new administration in Washington will continue with key trade policies like the Africa Growth and Opportunity Act (AGOA), there were risks to South Africa’s eligibility for the programme.
PwC said there was also the risk of Trump implementing his proposed 10%–20% tariff on all US imports, which could reduce demand for South African exports to the world’s largest economy.
PwC forecasts economic growth of between 0.5% and 1.3% in 2025 in its Economic Outlook, with the range reflecting the many uncertainties for the year ahead.
PwC on Thursday said low inflation, declining interest rates and rising real wages were supporting household consumption spending while business and investor confidence was finding support from public-private cooperation resulting in priority economic and structural reforms implemented during 2025.
“South Africa begins each year with uncertainty over its economic trajectory. However, at the start of 2025, there is much more to be positive about compared to 12 months ago,” said Lullu Krugel, PwC South Africa chief economist.
“Economists expect lower inflation, a decline in interest rates and higher economic growth in 2025 to support better business and investment conditions this year compared to 2024. All of this points to better conditions for consumers as well in terms of their spending power.”
PwC said it was expecting the South African Reserve Bank to reduce interest rates by another 50 basis points during first quarter of 2025 as the central bank aims to keep inflation near the middle of its 3%–6% target range while the consumer price inflation is forecast to average 4.5% in 2025.
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