South Africa: Economic growth rises in the fourth quarter of 2025
Q4 reading slightly above market expectations: South Africa’s GDP grew 0.4% in seasonally adjusted quarter-on-quarter terms in Q4, following a downwardly revised 0.3% expansion in the prior quarter. Q4’s reading was marginally above market expectations and in line with the prior five-year average.
In annual terms, the economy expanded 0.8% in Q4, following 2.1% growth in the previous quarter.
In 2025 as a whole, the economy grew 1.1%, following 2024’s 0.5%. 2025’s print marked a three-year high but disappointed markets.
Private and public spending growth gain steam: Compared with the prior quarter’s data, figures in Q4 improved for private consumption, which accounts for roughly two-thirds of GDP (+1.2% on a seasonally adjusted quarter-on-quarter basis vs +0.9% in Q3) and government consumption (+0.5% vs +0.3% in Q3). In contrast, readings worsened for fixed investment (+1.3% vs +1.4% in Q3), exports of goods and services (-0.6% vs +0.3% in Q3) and imports of goods and services (+0.5% vs +2.2% in Q3).
Household spending gained traction for the seventh consecutive quarter, likely boosted in Q4 by a seasonal uptick, along with easing inflation and the South African Reserve Bank’s monetary easing cycle, which began in September 2024. Meanwhile, fixed investment was buoyed by computer software, construction works, and machinery and other equipment.
Looking at sectoral data, growth was mainly driven by the finance, trade and personal services sectors, while manufacturing, mining and electricity production continued to drag on overall output.
U.S.-Iran conflict muddies the waters: Sequential GDP growth is seen as broadly stable in the coming quarters. Looking at 2026 as a whole, our Consensus is for economic growth to pick up and clock a four-year high. The recent lowering of U.S. tariffs, further monetary easing and the U.S. government’s one-year extension of South Africa’s African Growth and Opportunity Act (AGOA) trade concessions should support growth ahead. Still, the conflict in the Middle East muddies the outlook, and panelists will likely revise their 2026 projections downward. As South Africa is a net oil importer, higher oil prices will raise the import bill and may deter visitor arrivals due to higher airfares. Moreover, higher inflation tied to a protracted conflict threatens domestic demand by delaying further interest rate cuts.
Panelist insight: On the outlook, analysts at EIU commented:
“The South African economy performed better than expected in 2025, and there was an improvement in the trade surplus despite the imposition of US tariffs. Consequently, we expect the impact of US trade policy to have only a limited effect in overall terms on South Africa in 2026.”