South Africa’s Economy Likely Grew Modestly in Q4 2025

South Africa’s economy likely continued to grow in the fourth quarter of 2025, although at a slower pace than earlier in the year. I expect GDP growth of around +0.3% quarter-on-quarter, equivalent to +1.3% on an annualised basis.

Growth was stronger in the middle part of the year, with +0.9% q-o-q growth in Q2 and +0.5% q-o-q in Q3. A modest slowdown in Q4 would therefore not be surprising.

If this forecast is correct, it would bring full-year economic growth for 2025 to around +1.4%.

While this remains relatively weak, it still represents a meaningful improvement compared with the dismal +0.5% growth recorded in 2024, and also above the +0.7% growth seen in 2023.

Mixed sector performance in Q4
The available high-frequency data for the quarter points to weakness in some sectors.

Mining and manufacturing production both declined by around 0.5% quarter-on-quarter in Q4 (or roughly -2% on an annualised basis). Electricity production also fell sharply, down 3.1% q-o-q (around -12% annualised).

However, these sectors represent only part of the economy, and unfortunately the high-frequency data for many of the other sectors remains limited. This means the forecast uncertainty for Q4 GDP is relatively high.

Agricultural production is likely to have improved during the quarter, while sectors such as trade, construction, transport, government and personal services probably also recorded positive growth, although likely to varying degrees.

Outlook for 2026 still improving
Looking ahead, the outlook for the South African economy in 2026 still appears somewhat better.

Structural constraints in the economy are gradually easing, while cyclical conditions are also improving. Lower inflation and earlier interest rate cuts have helped support consumer spending, and private sector fixed investment should increasingly begin to contribute to growth.

As a result, I expect economic growth to edge higher from around +1.4% in 2025 to roughly +1.9% in 2026.

Middle East conflict creates new risks
However, global developments present an important risk to this outlook. The conflict in the Middle East has already pushed global oil prices higher.

At current levels, it appears possible that the petrol price in South Africa could rise by as much as R4 per litre in April. This would push CPI inflation temporarily towards around 4%, compared with my previous estimate of roughly 3.4% for that month.

As a result, average inflation for 2026 could rise from around 3.2% to closer to 3.7%.

Interest rates likely on hold for now
Given these global risks and the uncertainty around the duration of the conflict, I expect the South African Reserve Bank to keep interest rates unchanged for the foreseeable future, until there is greater clarity about the global outlook.

Before the recent escalation in geopolitical tensions, I expected three 25 basis point interest rate cuts during the course of the year.

If the conflict ends relatively soon and oil prices fall back towards pre-war levels, those rate cuts could still materialise later in the year.

Ultimately, the duration of the conflict will determine how the outlook for inflation and interest rates evolves.