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 the South African Reserve Bank’s monetary easing cycle, which began in September 2024. Meanwhile, fixed investment growth was supported by computer software, construction works, and machinery and other equipment. Looking at sectoral data, GDP 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 war muddies the waters: Sequential GDP growth is seen as broadly stable at Q4 2025’s levels 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 the African Growth and Opportunity Act (AGOA) should support growth ahead. Still, the conflict in the Middle East muddies the outlook, and our panelists will likely downwardly revise their 2026 growth projections ahead. 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 2026 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.”

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