Global economic developments, including raised tariffs and trade wars, have lowered South Africa’s 2025 economic growth prospects from a predicted 1.9% Gross Domestic Product (GDP) growth in March down to a revised 1.4% in May.

This is according to finance minister Enoch Godongwana who delivered the Budget Speech in Parliament on Wednesday.

“[Much] has changed since our last appearance in this House. The most troubling changes are the global economic developments which have, in the short space of two months, already had a significant impact on the domestic economic outlook. The global economy is facing heightened trade tensions and elevated policy uncertainty with worrying economic consequences.

“As a small, open economy, South Africa is dependent on global trade and financial inflows. This makes us particularly exposed to the global economic developments that I have just outlined.

“As a result, we now estimate real GDP to grow at 1.4% in 2025. This is lower than the 1.9% we projected in March. Over the next two years, we project real GDP growth to rise moderately to 1.6% in 2026 and 1.8% in 2027,” Godongwana said.

Risks to South Africa’s economic outlook also remain elevated going into the future.

“These include the worsening global outlook, weaker-than-expected growth in the fourth quarter of 2024, the persistence of logistics constraints and higher borrowing costs.

“These developments are a vivid reminder that we must urgently turn the tide on our economic prospects and get our fiscal affairs in order,” he said.

South Africa’s downward revision is not unique with the global economy also reacting to trade tensions.

“The International Monetary Fund now projects global growth at 2.8% in 2025. This is 0.5 percentage points lower than the January estimate.

“Similarly, global trade is projected at 1.7% in 2025, which is also much lower than the January estimate. At the same time, inflation expectations are now above central bank targets in many advanced and emerging market economies. And new trade barriers may raise inflation and prolong the cycle of higher interest rates,” he noted.

With these challenges arising, government’s vision of fostering faster inclusive growth remains anchored on four pillars:

• Maintaining macroeconomic stability,
• Implementing structural reforms,
• Improving state capability, and
• Accelerating infrastructure investment.

“Faster, inclusive growth that creates jobs is the only path towards a more prosperous South Africa.

“Attaining this growth must be our national obsession. We all have a stake and a responsibility to work towards this goal,” Godongawana said.