By Myra Knoesen
South Africa finds itself at a critical juncture in its economic journey. With global and local dynamics influencing market conditions, businesses and individuals must remain agile and well-informed.
Momentum Investments economists, including Sanisha Packirisamy and Tshiamo Masike, provide valuable insights into the key trends shaping the second half of the year.
Top trends for 2025
1. Reshaped interest rate expectations – higher terminal rates are anticipated globally as inflation concerns persist, impacting borrowing costs and investment decisions.
2. Fiscal policy tightening – the local government’s focus on maintaining fiscal discipline while addressing socio-economic challenges will be closely watched.
3. Private sector-led recovery – policy reforms are expected to drive private sector growth and buoy infrastructure improvements in the medium term.
4. Global trade uncertainties – changes in US policies and China’s economic trajectory could present both risks and opportunities for South Africa.
5. Inflation pressures – persistent inflation in key categories like healthcare and utilities may influence monetary policy decisions locally, together with an increasing emphasis on the need for a lower inflation target.
A turning point for South Africa’s Economy
South Africa has faced significant economic challenges in recent years, but 2025 presents an opportunity for recovery and growth. According to Momentum Investments, the country has made notable strides in stabilising its power supply and implementing structural reforms.
“An alleviation in load shedding, driven by the rapid rollout of the Energy Action Plan, has surprised many and provided a much-needed boost to business confidence,” notes Packirisamy.
Despite this progress, economic vulnerabilities persist. South Africa remains highly susceptible to global instability, with geopolitical tensions and commodity price fluctuations posing risks. “While sentiment has improved following the formation of the Government of National Unity (GNU), meaningful improvements in economic performance are crucial to sustaining this positive outlook,” adds Packirisamy.
The role of fiscal discipline
Fiscal sustainability remains a top priority for South Africa in 2025. The National Treasury has committed to maintaining a primary surplus within the medium-term expenditure framework. However, balancing fiscal consolidation with the need to address socio-economic challenges is no easy task.
“There is an urgent need for fiscally responsible policies that can significantly reduce poverty, enhance health and education outcomes, and stimulate economic growth while avoiding exacerbating fiscal challenges,” explains Masike. Rising public debt levels and escalating debt-service costs continue to weigh heavily on the economy, with the government allocating a significant portion of its revenue to interest payments.
South Africa’s inflation outlook
Inflation remains a key concern for policymakers. While consumer price pressures have eased significantly in certain areas, stubborn inflation in essential categories such as medical scheme coverage, electricity, and water persists. “The debate over South Africa’s inflation targets has intensified, with some advocating for a lower target closer to 3% to support long-term economic and price stability,” says Packirisamy.
The South African Reserve Bank (SARB) is expected to maintain a cautious approach, balancing the need for economic growth with the imperative to keep inflation within the target range. Analysts predict that the central bank may consider interest rate cuts in response to improving inflation trends, but the extent of monetary easing will depend on global economic conditions.
Global factors and their impact on South Africa
The international landscape presents both opportunities and challenges for South Africa. The return of former U.S. President Donald Trump to office has introduced new uncertainties, particularly concerning trade policies and interest rate expectations. “Trump’s proposed tax cuts and tariffs could fuel inflationary pressures globally, complicating the path forward for monetary policy,” observes Masike.
China’s economic trajectory is another crucial factor to watch. While fiscal interventions have stabilised the country’s property market, consumer demand remains weak. South Africa, as a key trade partner, must navigate these developments carefully to maximise export opportunities while mitigating risks associated with global slowdowns.
Private sector driving recovery
Momentum Investments emphasises the vital role of the private sector in driving South Africa’s economic recovery. Improved energy reliability, combined with regulatory reforms in logistics and infrastructure, is expected to encourage increased investment.
