Sandton CBD economy South Africa's economy is still on a positive trajectory, if only just.
Image: Karen Sandison / Independent Media
Although South Africa’s economic growth has been disappointing, it is expected to pick up modestly in 2025 compared to previous years, PPS Investments predicts.
If domestic inflation remains under control, there is also a chance that the South African Reserve Bank (SARB) might deliver at least one more rate cut this year.
In March the SARB revised its national growth forecast for 2025 from 1.8% to 1.7%, which is still above 2024’s growth rate of 0.6%.
Although the global tariff war remains a significant threat to the economy, the direct impact on South Africa could be lower than anticipated as exports to the US make up less than 10% of GDP, PPS added. However, the direct impact is still hard to quantify at present.
A further risk on the domestic front is the future of the Government of National Unity, following the recent disagreement over the Budget, which was passed by the National Assembly despite the Democratic Alliance not voting in favour of it.
There are now features of the GNU unravelling, although these could be premature given that discussions remain ongoing.
As for the markets, reasonable medium term returns are looking possible once the volatility subsides, PPS said in its latest House View Positioning Statement.
“The SA equity market had a good start to the year but in recent days the JSE has fallen sharply in tandem with global equities on Trump’s tariff announcement. SA nominal bonds have also struggled more recently, partly on global concerns and partly due to domestic political worries, which have caused bonds and the rand to weaken,” PPS said.
“Earlier this year we trimmed our domestic equity overweight as global macro risks began to rise, and this has proven helpful given the sharp sell-off recently.
“We are likely to upweight SA equities in the event of further material weakness, given the constructive valuation backdrop, which suggests reasonable medium term returns once the volatility subsides.
“We remain underweight SA bonds in our house view, which has proven helpful given the deterioration in local political dynamics as well as the spike in global risk aversion,” the organisation added.
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