The South African Reserve Bank (SARB) has lowered its 2025 GDP growth forecast to 0.9% from 1%, citing weak first-quarter economic data and the anticipated impact of higher US tariffs. Risks to growth are viewed as balanced, but projections for 2026 were cut to 1.3% (from 1.6%), while 2027’s forecast was raised to 2% (from 1.8%), reflecting the near-term costs of targeting lower inflation. The IMF, meanwhile, kept its South Africa growth estimates steady at 1% for 2025 and 1.3% for 2026 despite improved global sentiment from new US trade deals.
CareEdge South Africa noted that faster reforms—especially in addressing logistics bottlenecks—are essential for growth to surpass 1% in 2025. They emphasised that the government’s infrastructure investment drive must reverse the decline in gross fixed capital formation.
Fiscal data for Q1 FY26 showed encouraging consolidation signs, with a budget surplus of ZAR 48.8 billion in June 2025, up from ZAR 38.6 billion a year earlier, supported by stronger corporate tax revenues, likely aided by higher commodity prices. The cumulative budget deficit for Q1 FY26 was halved compared to last year, though tariff-related trade risks and spending pressures remain. Government revenues rose 8.6% YoY in April–June, led by VAT, customs duties, fuel levies, and an 8.7% increase in personal income tax.
The National Assembly passed the appropriation bill, allocating funds to departments, while the National Treasury introduced new budget guidelines. These include the Targeted and Responsible Savings (TARS) mechanism to cut low-priority programs and an overhaul of the Budget Facility for Infrastructure (BFI) to better accommodate early-stage proposals.
On trade, US–South Africa relations are tense, with Washington considering sanctions over foreign policy differences. South Africa has yet to secure a trade deal with the US but has proposed LNG imports, agricultural exports, tariff exemptions, and USD 3.3 billion in South African investments into US industries. Prospects are uncertain, especially with new US tariffs—30% reciprocal, plus higher duties on steel, aluminium, and automotive products—already hurting exports. Automotive shipments to the US fell sharply in Q2 2025.
The trade surplus widened to ZAR 22 billion in June, but cumulative 2025 figures are lower than 2024. Imports fell 2.9% YoY in June, while exports dropped 2.9% in the same month. Elevated commodity prices, particularly for gold and platinum, provide some cushion, but the trade balance faces pressure without progress on a US deal.
Monetary policy eased further, with the SARB cutting the repo rate by 25 basis points to 7% in July, totalling 125 bps in cuts since September 2024. Inflation rose slightly to 3% YoY in June but remains at the lower end of the target range. The SARB announced it will now formally target the 3% lower bound of its inflation range (from the previous 4.5% midpoint), revising 2026 inflation forecasts to 3.3% and 2027 to 3%.
The Rand’s movements remain sensitive to US tariffs, weakening to over ZAR 18.1/USD in late July before ending the month up 0.7% against the dollar. Over the past three months, it has gained 2%, supported by improved sentiment and political stability. CareEdge notes that US–SA trade relations, global trends, and domestic political dynamics will remain key drivers of the currency’s path.