World Bank Revises Upward South Africa’s 2025 Growth Forecast

South Africa’s economy is projected to experience growth, according to the World Bank’s latest “Global Economic Prospects” report. The report also details broader trends in Sub-Saharan Africa and highlights potential risks related to global trade.

Growth in Sub-Saharan Africa is also anticipated to increase, though challenges remain in reducing extreme poverty.

Economic Growth Projections

South Africa’s economy is estimated to grow 1.3% in 2025, a significant increase from the 0.6% growth recorded in 2024. Further growth is forecast at 1.4% in 2026 and 1.5% in 2027. This improvement is attributed to a more reliable electricity supply, a strong agricultural harvest, and a rise in business confidence.

Overall growth in Sub-Saharan Africa is projected to reach 4% in 2025, accelerating to 4.3% in 2026 and 4.7% in 2027. Despite these gains, the World Bank notes that growth remains below the region’s historical average and is currently insufficient to substantially reduce extreme poverty.

Nigeria is expected to lead among Africa’s three largest economies with 4.2% growth in 2025, supported by the finance, information and communication technology sectors, and a recovery in agriculture. Ethiopia’s growth is projected to decelerate to 7.2% from 8.1% in 2024.

Inflation and Monetary Policy

Headline inflation across Sub-Saharan Africa has decreased due to lower global food and energy prices. However, core inflation has risen for the first time in two years, prompting some central banks to pause rate cuts.

The South African Reserve Bank is anticipated to continue easing monetary policy this year. This expectation follows a decline in inflation expectations during the fourth quarter, indicating increased confidence in the Bank’s 3% inflation target.

Global Trade Risks and Agoa

The World Bank cautions that South Africa faces elevated exposure to global trade risks. While most Sub-Saharan African economies are expected to experience limited fallout from trade fragmentation, South Africa, along with Ivory Coast and Kenya, is an exception due to its reliance on the US market for goods and commodity exports.

Current projections assume existing bilateral tariffs will remain in place. Tariffs imposed by the US administration remain a factor.

The expiration of the African Growth and Opportunity Act (Agoa) in late 2025 poses a significant risk to some economies unless extended. The US House of Representatives recently passed an extension bill, sending it to the Senate for approval. The proposed renewal would extend preferential trade access to December 31 2028.

However, the bill’s current form leaves South Africa’s eligibility open to interpretation and potential future amendment, raising concerns among local exporters in sectors such as vehicles, citrus, and wine.

US-South Africa Relations

Relations between the US and South Africa have been strained recently. A US trade representative has identified South Africa as a “unique problem” due to unresolved tariff and regulatory barriers.

More recently, a US senate committee chair has described South Africa as an “adversary,” citing concerns over joint naval exercises with Iran, Russia, and China.