Moody’s Trims South Africa’s 2025 Growth Forecast as Global Trade Tensions Rise

Global uncertainty is putting pressure on South Africa’s already fragile economy. Moody’s Ratings has revised its forecast for South Africa’s gross domestic product (GDP) growth in 2025 downward, citing a cooling global economy, trade tensions, and lingering supply-side challenges.

In its latest Global Macro Outlook 2025–26 Update, Moody’s said it now expects South Africa’s GDP to expand by just 1.5%, down from its previous estimate of 1.7%.

This figure is broadly in line with the South African Reserve Bank’s own projection but far more optimistic than the International Monetary Fund’s (IMF) revised outlook of 0.8%, released last week.

Global Headwinds Taking Their Toll

Moody’s highlighted that the slowdown is not unique to South Africa. The global ratings agency has trimmed forecasts for nearly all major G20 economies, including the United States, China, Germany, and India.

“Policy uncertainty weighs on a global economy that was already slowing,” Moody’s said. “Trade tensions — especially between the US and China — are likely to dampen global trade and investment with consequences across the G-20.”

Moody’s expects US growth to fall to 1% in 2025, with China slowing to 3.8%, suggesting a challenging trade environment for export-reliant economies like South Africa.

Tariffs and Trade Wars Driving the Forecast Down

At the heart of the expected global deceleration are tariffs and trade imbalances. Although some tariffs between the US and China may be reduced, Moody’s believes they will remain “considerably restrictive,” making it harder for global trade to recover.

The report also notes that U.S. officials see tariffs not just as trade barriers but as fiscal revenue tools. That could mean higher costs and lower global investment, a trend already reflected in Korean exports, which fell 5.2% year-on-year in April.

These dynamics are likely to continue hurting South Africa’s export sectors and limiting opportunities for local investment and job creation.

Domestic Fragilities Amplify the Risk

While global factors are the dominant theme, Moody’s also noted South Africa’s internal economic vulnerabilities, including:

• Weak domestic demand

• Ongoing supply chain disruptions

• Policy and regulatory uncertainty

• Energy supply instability

All of these amplify the impact of global shocks on the local economy.

Room for Optimism?

Despite the downgraded outlook, Moody’s forecast remains more upbeat than the IMF’s. This suggests some confidence that South Africa could still benefit from stable monetary policy, gradual infrastructure recovery, and targeted reforms—if these are implemented in time.

However, the country remains highly sensitive to external shocks and capital flows. A protracted downturn in global trade or a failure to address energy and logistics bottlenecks could see this forecast deteriorate further.

South Africa’s path to economic recovery is getting steeper. With global trade cooling and policy tensions rising, the government may need to act swiftly to protect growth, attract investment, and stabilize key sectors.

As Moody’s has signaled, the global stage is shifting—and South Africa must adapt to avoid being left behind.

{Source: IOL}

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