The World Bank has revised its 2025 economic growth outlook for SA, positioning it between more optimistic forecasts and attributing the improvement to the energy and logistics sectors.
In Tuesday’s SA Economic Update report, the World Bank raised its GDP growth forecast for 2025 to 1.8%. That was an increase of 0.5 percentage points on its previous estimate.
Economic growth is expected to accelerate to 2% by 2027, aligning with the Reserve Bank’s projections, as outlined by its monetary policy committee last week.
The 1.8% figure is closely aligned with Old Mutual chief economist Johann Els’ earlier forecast that “reduced structural constraints, coupled with lower inflation and interest rates, could push GDP growth above 2% in 2025”.
The World Bank’s outlook also remains slightly more optimistic than Bank of America’s recent projection of 1.6% for the same period.
The World Bank’s outlook also remains slightly more optimistic than Bank of America’s recent projection of 1.6% for the same period.
While the improved forecast signals some optimism, the World Bank warns that SA still faces significant hurdles in achieving a growth rate that would meaningfully address its high levels of poverty and unemployment.
“Socioeconomic indicators, such as poverty and unemployment rates, are not expected to improve significantly in this scenario, as the expansion of the economy will not be sufficient to generate a surge in employment,” the World Bank states.
The World Bank also says that a 1% increase in GDP growth is expected to create only 30,000-50,000 jobs.
That would be far less than a recent PwC forecast, in which it is estimated that the economy could generate 115,000 jobs in 2025 “based on the long-term relationship between economic and employment growth”.
PwC projects a more modest GDP growth rate of between 0.5% (the downside scenario) and 1.3% (the upside scenario) in 2025, “with the range reflecting the many uncertainties for the year ahead”.
A major factor behind the World Bank’s improved outlook is the suspension of power utility Eskom’s national load-shedding since March 2024.
The power interruptions made a brief return at the weekend.
The World Bank’s report also highlights recovery in the logistics sector, particularly in rail and ports, which had been affected heavily by inefficiencies and also industrial action in previous years.
Implementing key reforms at Transnet, SA’s state-owned transport logistics company, has helped ease bottlenecks in freight transport, enhancing trade flows.
While economic performance remained modest in 2024, the World Bank mentions the “successful political transition that followed the national elections in May 2024" that it said had brought a new sense of optimism.
Inflation
This positive sentiment had been reinforced by stable inflation, said the World Bank.
In December, consumer price inflation increased to 3%, which is the lower end of the Reserve Bank’s 3%-6% target range. This was followed by a 25 basis point interest rate cut to 7.5%.
However, the World Bank remains cautious about the long-term sustainability of SA’s economic recovery.
Economic expansion had to be much higher to generate enough jobs to reverse poverty trends, it said.
“Two main forces will continue to shape the future of the SA economy: the government’s ability, first, to unlock economic growth through long-delayed structural reforms, and second, to manage the fiscal consolidation process that is required to stabilise public debt.”
The World Bank said that over the longer term SA could address its human capital gap “with greater determination” if the country wanted to achieve faster, more inclusive economic growth.
Despite political instability, which disrupts trade, the World Bank also flagged climate change as one of the biggest risks affecting SA’s economic outlook, citing the KwaZulu-Natal floods in 2022 and severe droughts in several provinces.
“The World Bank estimates that the overall macroeconomic damages of climate risks could average up to 0.8% of GDP annually between 2022 and 2050.
“The water shortages may increase given the deterioration of existing infrastructure, the challenges of supply ... governance challenges and overuse by consumers,” the report stated.
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