South Africa’s economy is set to perform better in 2025, with growth expected to approach 2%, up from the 1.1% forecast for 2024, according to Lesetja Kganyago, Governor of the South African Reserve Bank (SARB). In an interview at the World Economic Forum in Davos, Switzerland, Kganyago said growth estimates for the year range from 1.6% to 2%, with the SARB leaning toward the higher figure.
Kganyago attributed the improved outlook to the formation of a broad coalition government in the past year, which has driven momentum in structural reforms. He believes these reforms will accelerate growth, helping South Africa move beyond the stagnant 1% annual growth seen in recent years.
However, the inflation outlook remains uncertain. Kganyago pointed to multiple risks, including the potential return of protectionist policies under U.S. President Donald Trump, which could disrupt global trade and impact South Africa’s economy. Other risks include the rand’s exchange rate, fluctuations in global oil prices, and rising local food prices.
In November, South Africa’s annual inflation stood at 2.9%, below the SARB’s target range of 3% to 6%. However, inflation is expected to rise slightly in December and average around 4.5% in 2025, near the bank’s midpoint target.
Despite inflation concerns, the SARB has reduced interest rates twice in the past year, and analysts anticipate another rate cut in the coming weeks. The new coalition government, which includes the Democratic Alliance and smaller political parties, has sparked optimism among investors. Reforms in key sectors such as electricity, freight rail, and visas are expected to drive future growth.
