GDP is important because it gives information about the size of the economy and how it is performing, according to the IMF.
Economists expect that there will be an uptick in GDP for the second quarter that will be announced tomorrow, but warn that it will not be sufficient for economic growth to gain traction. GDP increased by only 0.1% in the first quarter compared to the fourth quarter of 2024.
Tracey-Lee Solomon, economist at the Bureau for Economic Research (BER) says a modest acceleration in gross domestic product (GDP) is expected, with many of the available high-frequency data showing slight, but broad-based improvement.
“The big services sector and small but volatile agricultural sector are more difficult to gauge. Our high-frequency trackers point to some upside to our published 0.3% forecast for the second quarter. The GDP announcement will be followed by the first manufacturing and mining production figures for the third quarter, offering an early gauge of momentum beyond GDP for the second quarter.
“Taken together, last week’s PMIs and business confidence index point to muted momentum in the third quarter, suggesting that even if GDP improves in the second quarter, the economy is not gaining real traction.”
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Old Mutual predicts 0.6% economic growth thanks to market rebound
Johann Els, group chief economist at Old Mutual, says South Africa’s GDP growth for the second quarter is set to show a marked rebound. “After eking out just +0.1% in the first quarter (or –0.3% excluding a strong agricultural contribution), growth in the second quarter is likely to land between +0.6% and +0.8%, translating into roughly +2.8% on an annualised basis versus +0.4% in the first quarter.”
He points out that there were sharp recoveries in sectors that slumped in the first quarter. “Mining swung from –4% to +4%, manufacturing from –2% to +1.6% and electricity from –2.6% to +0.6%. Consumer demand also held up, with robust car and retail sales adding support.
“Encouraging as the rebound may appear, it still signals subdued underlying momentum. Average GDP growth for the first half of 2025 will be just +0.4%. It aligns with a full-year growth projection of around +1.2% (up from +0.5% in 2024), which assumes that economic growth will expand in the second half of the year at roughly the same pace as in the first half.”
Els says that scenario is plausible given easing structural constraints, low inflation and lower interest rates, but external headwinds — notably the US trade war — will limit upside. “Inflation is expected to edge higher into year-end, but only mildly, while further interest-rate relief looks unlikely.
“Risks remain on the demand side, too, with potential job losses in tariff-affected industries posing a drag on household spending.”
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FNB predicts 0.5% although low economic growth will persist
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, also expect that a low-growth regime will persist despite a likely GDP rebound. “This comes at a time when growth expectations for 2025 have been revised down to around 1.0%, from nearly 2.0% at the beginning of the year.
“The outcome for the first quarter confirmed the economy’s weak growth path, posting just 0.1%, supported mainly by a rebound in agriculture. Excluding agriculture, GDP would have contracted by 0.3% and slowed to 0.3%.”
They point out that at the time of the first quarter GDP release, the RMB/BER Business Confidence Index stood at 45. Since then, a turbulent policy and global trade backdrop have weighed heavily on sentiment.
In April, the US administration announced reciprocal tariffs, raising uncertainty and sparking a global market sell-off. While the implementation was briefly paused, a subsequent tit-for-tat trade war with China escalated tariffs above 100% before a truce brought them back below 50%.
In South Africa, Treasury struggled to pass the 2025 budget, with a proposed Vat hike ultimately scrapped in the final May 2025 “Budget 3.0.” These developments eroded confidence in trade prospects as well as the durability of the government of national unity (GNU).
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Despite weaker sentiment, GDP will increase economic growth
The FNB economists say as a result, the RMB/BER business confidence index fell to 40 in the second quarter and remained depressed at 39 in the third quarter of 2025. To put this into perspective, six out of ten businesses remain dissatisfied with prevailing conditions, a poor signal for investment and employment in an economy desperate for jobs.
However, Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say, despite weak sentiment, high-frequency data for the second quarter points to a stronger growth outcome than in the first quarter. They point out that mining rebounded by 3.6% and manufacturing by 1.6%.
Electricity output edged up by 0.4% after contracting in the first quarter. On the demand side, retail sales volumes increased 0.9% after a 0.4% decline, with motor trade as well as food and beverages activity also showing improvement.
However, wholesale trade remained under pressure as tepid demand raises inventory costs. In transport, freight volumes contracted by 1.5%, though passenger journeys still grew, albeit at a slower pace.
Taken together, they say these factors suggest that GDP likely accelerated to around 0.5% in the second quarter, compared to 0.1% in the first quarter. “Risks to this estimate stem from the volatile agricultural sector, which could swing the outcome either way, although we expect modest growth.
“Private sector fixed investment will be closely watched, given the 4.5% contraction in the first quarter and persistently subdued business confidence. We currently forecast a 0.3% decline in private sector fixed investment in 2025, after a 4.2% drop in 2024.”
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Nedbank predicts 0.6% increase in economic growth thanks to rebounds in mining and manufacturing
Crystal Huntley, economist at the Nedbank Group Economics Unit, predicts a 0.6% growth in GDP for the second quarter, an improvement from the near stagnation of 0.1% in the first quarter. “The recovery is broad-based, driven mainly by rebounds in mining, manufacturing and services such as retail and hospitality, although wholesale sales declined.
“Agriculture’s growth slowed after a strong start, affected by animal diseases. Looking ahead, domestic demand, supported by consumer confidence, low inflation and reduced interest rates, is expected to boost growth.”
However, she warns, global demand, US tariffs, high production costs and infrastructure challenges pose risks. “Structural reforms are deemed essential to improve competitiveness, with an overall GDP growth forecast of about 1% for 2025 and an average of 1.5% over the next three years, amid global uncertainties.”
