Cape Town – The South African Reserve Bank has revised its 2025 economic growth forecast from 1.8% to 1.7%, citing significant challenges to recovery.
In its 20 March Monetary Policy Committee (MPC) statement, the bank kept interest rates unchanged and warned of potential further downward revisions due to global uncertainty, particularly in the United States.
Governor Lesetja Kganyago announced that the committee had decided to maintain the benchmark interest rate at 7.5%. He pointed to escalating trade tensions, shifting geopolitical relationships, and volatile US economic sentiment as key risks.
“The world is experiencing extreme levels of uncertainty. Trade tensions have escalated, and longstanding geopolitical relationships are shifting abruptly,” he said.
“In these circumstances, the global economic outlook is unpredictable,” Kganyago said, emphasising the uncertainty around future policy directions.”
By 16:08 in Johannesburg on Thursday, the rand had weakened by 0.4% against the dollar, the two-year bond yield had fallen three basis points to 8.23%, and the benchmark stock index had extended its decline.
South Africa’s annual inflation held steady at 3.2% in February, defying expectations of a rise to 3.4% and strengthening calls for a rate cut. However, this prospect has been tempered by escalating trade tensions, particularly US President Donald Trump’s rhetoric and tariff measures.
The US entered 2025 with strong stock markets and a rising dollar, but recent disruptions from tariffs and policy uncertainty have dampened growth expectations.
Meanwhile, other major economies have shown resilience, with stronger currencies and persistently high inflation.
Adding to tensions, Trump halted aid to South Africa over concerns about land laws and other issues, and his administration expelled the country’s ambassador to Washington.
Despite these claims, South Africa has not confiscated private land since the end of apartheid in 1994.
Domestically, South Africa’s economic growth picked up in late 2024, driven by increased household spending —boosted by lower inflation and withdrawals from the two-pot retirement system — and a recovery in agriculture. However, overall growth remained weak at 0.6% for the year, slightly below expectations.
The Reserve Bank attributed the 2025 downgrade to subdued demand and lingering supply-side constraints, warning that risks to growth remain skewed to the downside.
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Compiled by Betha Madhomu
