By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
The International Monetary Fund's (IMF) latest round of forecasts, published through the April World Economic Outlook (WEO), reflect a stark revision to global growth prospects for 2025 and 2026. The tariff- and uncertainty-laden environment has resulted in the 2025 growth forecast being downgraded by 0.5ppts to 2.8%, while the 2026 forecast is down 0.3ppts to 3.0%. The prognosis was already sobering-enough in the January WEO, when growth was anticipated to remain subdued relative to the pre-pandemic average and the challenge that tariffs, and uncertainty presented to the outlook, was articulated. However, the level of tariffs imposed ahead of this update and the market volatility that followed resulted in larger revisions than flagged in risk scenarios.
Advanced economies
The United States (US)-led import tariffs are expected to have a pronounced impact on the country's growth outlook. Trade restrictions and policy uncertainty are expected to exacerbate softer demand, and the growth forecast has been slashed by 0.9ppts, to 1.8%, turning the upgrade trend in this year's forecasts. Furthermore, stickier inflation and unemployment will complicate the Fed's reaction, while some market participants have ramped up expectations for rate cuts given recession concerns, the Fed's wait-and-see approach continues to challenge these expectations. The Euro Area's growth forecast has been cut by 0.2ppts to 0.8%, still highlighting structural weakness but buffered by easing monetary policy and plans to ease fiscal limits to increase spending on defence and infrastructure. The advanced economy group is expected to post growth of 1.4% this year, down from 1.9% previously.
Emerging markets
Emerging and developing markets are expected to grow by 3.7%, also down 0.5ppts from the previous forecast. One of the larger country-level revisions has been to China's growth given how the tariff escalation with the US will compound existing domestic demand constraints. China's growth is expected to average 4.0%, 0.6ppts down from the previous forecast. For the broader emerging and developing market space, waning international development assistance, limited policy buffers, and the need to fund structural reform will bring fiscal stability into focus as tighter financial conditions and risk aversion raise borrowing costs. While the inflation outlook is barely changed, the risk of currency depreciation has maintained upside risk to inflation and inflation expectations have trended higher than central bank targets in some cases.
South Africa
South Africa's growth forecast has also been downgraded from 1.5% to 1.0%, our forecast is 1.3%, as the adverse external environment and local Government of National Unity (GNU) instability weigh on confidence. Moreover, disappointing high-frequency data has provided a weak starting point for 2025 growth. Fortunately, inflation remains muted and maintains space for further monetary policy easing. However, the weight of an uncertain environment, including on the fiscal policy front, on confidence and the rand will likely keep the SARB conservative. The recent publication of Operation Vulindlela Phase 2.0 is further emphasis of the government's stern pursuit of structural reform progress. However, there is little room for error. Fast-changing global winds dictate that the laggards of transition will be the biggest losers, and it is hard to make a trade and investment case with crippling structural constraints.
Week in review
Electricity production increased by 1.1% y/y in March, reflecting a modest acceleration from a 0.2% y/y increase in February and marking the 16th consecutive month of annual increase. Year-to-date, electricity production is up by 2.3% compared to the same period last year. The continued increase in electricity production is consistent with the ongoing energy reforms and improvement in Eskom's operational performance. While electricity output has been increasing on an annual basis, monthly seasonally adjusted output weakened again in 1Q25, showing a 2.0% q/q contraction after contracting by 0.7% in 4Q24, and confirming that the electricity sub-sector weighed on 1Q25 GDP.
Gross foreign exchange reserves reached a record high of $67.6 billion in April, up from $67.5 billion in March. This increase was primarily due to an increase in gold reserves and SDR holdings. Counteracting these were foreign currency reserves, which fell to $48 billion from $48.6 billion.
Manufacturing production output (not seasonally adjusted) declined by 0.8% y/y in March, following a 3.2% y/y decline in February - marking the eighth consecutive month of annual contraction. Seasonally adjusted manufacturing output, which aligns with the official calculation of quarterly GDP growth, contracted sharply by 2.2% m/m, after expanding by a revised 0.7% m/m in February (previously reported as 0.3%). Output fell by 2.3% q/q, a steeper decline than the -0.9% recorded in 4Q24, confirming that the manufacturing sector dragged GDP growth in 1Q25.
Week ahead
On Tuesday, the Quarterly Labour Force Statistics (QLFS) for 1Q25 will be published. In 4Q24, the QLFS showed an increase in total employment by approximately 132 000, following a previous rise of 294 000. Unemployment decreased by approximately 20 000, leading to a 0.2ppt drop in the official unemployment rate to 31.9%, and a 0.2ppt increase in the absorption rate to 41.1%, the highest since 1Q20. However, youth unemployment remained high, with the jobless rate for the 15-24 age group at 59.6% and for the 25-34 age group at 39.4%.
On Thursday, data on mining production for March will be released. In February, mining output declined sharply by 9.6% y/y after contracting by 1.5% in January. On a seasonally adjusted basis, output was down sharply by 4.4% m/m. The upcoming March print will give a complete picture of how the sector contributed to 1Q25 GDP growth.
Tables
The key data in review
| Date | Country | Release/Event | Period | Act | Prior |
|---|---|---|---|---|---|
| 6 May | SA | Electricity production % y/y | Mar | 1.1 | 0.2 |
| 8 May | SA | Gross foreign reserves $ billion | Apr | 67.6 | 67.5 |
| SA | Manufacturing production % m/m | Mar | -2.2 | 0.7 | |
| SA | Manufacturing production % y/y | Mar | -0.8 | -3.2 |
Data to watch out for this week
| Date | Country | Release/Event | Period | Survey | Prior |
|---|---|---|---|---|---|
| 13 May | SA | Official unemployment rate % | 1Q | -- | 31.9 |
| 15 May | SA | Mining production % m/m | Mar | -- | -4.4 |
| SA | Mining production % y/y | Mar | -- | -9.6 |
Financial market indicators
| Indicator | Level | 1 W | 1 M | 1 Y |
|---|---|---|---|---|
| All Share | 90,890.08 | -0.80% | 10.60% | 18.10% |
| USD/ZAR | 18.2 | -2.20% | -7.40% | -1.70% |
| EUR/ZAR | 20.44 | -3.00% | -4.70% | 2.70% |
| GBP/ZAR | 24.11 | -2.80% | -3.60% | 4.10% |
| Platinum US$/oz. | 984.32 | 1.50% | 7.00% | 0.60% |
| Gold US$/oz. | 3,305.72 | 0.50% | 10.80% | 42.90% |
| Brent US$/oz. | 62.84 | -0.40% | -2.10% | -24.40% |
| SA 10 year bond yield | 9.65 | -0.40% | -5.30% | -14.50% |
FNB SA Economic Forecast
| Economic Indicator | 2022 | 2023 | 2024f | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|---|
| Real GDP %y/y | 1.9 | 0.7 | 0.6 | 1.3 | 1.6 | 2.0 |
| Household consumption expenditure % y/y | 2.5 | 0.7 | 1.0 | 2.1 | 2.0 | 2.1 |
| Gross fixed capital formation % y/y | 4.8 | 3.9 | -3.7 | 1.3 | 2.6 | 3.9 |
| CPI (average) %y/y | 6.9 | 6.0 | 4.4 | 3.5 | 4.3 | 4.4 |
| CPI (year end) % y/y | 7.2 | 5.1 | 3.0 | 4.3 | 4.2 | 4.4 |
| Repo rate (year end) %p.a. | 7.00 | 8.25 | 7.75 | 7.00 | 7.00 | 7.00 |
| Prime (year end) %p.a. | 10.50 | 11.75 | 11.25 | 10.50 | 10.50 | 10.50 |
| USD/ZAR (average) | 16.40 | 18.5 | 18.3 | 18.6 | 18.6 | 19.1 |
