No fireworks expected, but GDP figures are disappointing — economists

Economists expected no fireworks from the GDP figures for the first quarter of the year, but they all agree that the growth of 0.1% is disappointing.

They even wonder if expecting economic growth of 1% is already a stretch, as the economy was drifting from slow growth to virtually no growth.  

Jee-A van der Linde, senior economist at Oxford Economics Africa, says the South African economy continued to trend sideways at the start of 2025.

“The latest data print does not fundamentally alter our view of gradual economic growth in 2025, but we acknowledge increasing downside risk to our forecast.

“Unless there is a stronger pickup in economic growth during the rest of this year, 1% real gross domestic product (GDP) growth for 2025 seems like a stretch at this point. The moderation in household consumption was broadly in line with our expectations, with the recent interest rate cut not expected to provide a meaningful boost in the second quarter.

“In addition, the lacklustre investment performance reflects South Africa’s incoherent policies. Considering the uncertainty stemming from domestic politics and US tariffs during the second quarter, we anticipate private sector investment will remain depressed in the near term.”

Van der Linde points out that the impact of US tariffs will start to reflect in the data for the second quarter, with exports likely to show strain heading into the second half of 2025. “These circumstances make it challenging for businesses to ramp up investment and expand their operations. The next quarter’s GDP figures are unlikely to look much better.”

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Disappointing GDP, although higher than market expectations

Maarten Ackerman, chief economist and advisory partner at Citadel, also views the GDP growth as disappointing, although it outperformed market expectations of a 0.1% contraction. However, he says the marginal improvement is “nothing to celebrate”, as the economy remains stuck in a protracted low-growth cycle.

“This print brings the full-year growth to just 0.8%, still well below 1% and less than half the rate of the population growth. This confirms that South Africa continues to experience a per capita recession.”

He points out that agriculture remained the standout performer, growing nearly 16% in the first quarter, following 17% growth in the previous quarter. “Despite being a small sector, agriculture is one of the fastest-growing industries and critical for job creation. Its resilience is noteworthy given the ongoing political, logistical and climate-related challenges.”

With household consumption increasing by only 0.4%, Ackerman says it is a slowdown from the previous quarter, which benefited from withdrawals linked to the two-pot retirement system. He notes that while the recent interest rate cut may support consumer spending, it is concerning that consumption remains the economy’s only reliable growth driver.

“This latest GDP figure paints a familiar picture: a few resilient sectors keeping the economy afloat, while structural underperformance holds us back. Without meaningful and coordinated reform, the economy will continue to limp along, unable to meaningfully reduce unemployment or address pressing social challenges.”

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Low inflation and repo rate cuts should support household spending

Thanda Sithole, senior economist at FNB, says today’s GDP figure is in line with their 1.3% growth forecast for 2025. “While high-frequency indicators for 2Q25 were mixed, with new vehicle sales still showing robust growth, manufacturing PMI continues to disappoint, remaining in contractionary territory for the seventh consecutive month.

“This suggests ongoing pressure on the manufacturing sector, which carries significant weight in the economy and is likely to continue weighing on near-term growth. Business confidence survey results for the second quarter will be released later this week and should provide a clearer indication of how firms view current operating conditions.”

She points out that business confidence is crucial for fixed investment, growth and employment. “Encouragingly, inflation remains benign and the South African Reserve Bank (Sarb) reduced the restrictiveness of monetary policy by a cumulative 100 basis points from the peak of the latest hiking cycle.

“This, together with continued growth-oriented reforms under the Government of National Unity (GNU), should support growth over the medium term.”

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GDP shows economy grew slower than in the fourth quarter

Crystal Huntley, Johannes (Matimba) Khosa and Nicky Weimar, economists at the Nedbank Group Economic Unit, say the 0.1% GDP growth was slightly better than their and the market’s forecasts of no growth.

“Compared to the same quarter a year ago, the economy grew by 0.5%, slower than in the fourth quarter of 2024. We did not expect fireworks, but today’s numbers are disappointing. Statistics SA also lowered the 2024 estimate slightly.

“Despite the lower base and patchy picture of the first quarter, we still expect the economy to gain some upward traction in the quarters ahead. The boost will continue coming from consumer demand, which should accelerate as inflation remains subdued, and interest rates decline further, bolstering real incomes and lowering borrowing costs.”

They say the upside will be capped by slower government spending due to fiscal constraints, patchy fixed investment and a weaker net trade position caused by fading global growth, subdued commodity prices and persistent policy uncertainties.

“We expect GDP to grow by 1% in 2025, only moderately better than 0.5% in 2024, and we forecast GDP growth of around 0.3% for the second quarter.”

ALSO READ: Reserve Bank warns global trade tensions can cut GDP by 0.7%

Weak economic growth evident before adverse global developments

Professor Raymond Parsons, economist at the NWU Business School, said the disappointing GDP growth figure of 0.1% comes as no surprise, as it merely confirms several months of muted high-frequency economic data that pointed to this likely outcome.

“Although adverse global developments earlier this year also played a role, the weaker economic data was already apparent before then. This reality was already recently also presaged by several reduced growth forecasts for 2025, including by the National Treasury (1.9% to 1.4%) and the Sarb (1.7% to 1.2%).

“If present trends persist, the growth outlook for this year now seems likely to be only about 1%, possibly rising to about 1.5% in 2026. It is clear that the incipient economic recovery in South Africa is presently struggling to gain momentum and needs maximum support to strengthen the business cycle upturn.”

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At least GDP managed to avoid contraction

Kristof Kruger, senior fixed income trader at Prescient Securities, says the GDP offered a mixed picture of economic performance. “While the economy showed some resilience in the quarter-on-quarter figures, annual growth continues to slow down, reflecting ongoing structural challenges.

“On a more encouraging note, the GDP growth exceeded the market expectation of -0.1%. While the number is modest, it provides some relief, indicating that the economy managed to avoid contraction during the first quarter.”

He says the overall growth trajectory for 2025 remains subdued and that South Africa’s economic fundamentals continue to face several headwinds, including:

• Structural issues like energy shortages and high unemployment
• Global trade uncertainty and slow growth in key trading partners
• Domestic policy challenges and a lack of political cohesion within the government.

“The first-quarter GDP data for South Africa offers both hope and caution. The slight surprise in quarter-on-quarter growth shows that there is some resilience, but the continued slowdown in annual growth paints a more challenging economic picture.”