Moody’s Ratings has cut SA’s real GDP growth projections for 2025 to 1.5%, a 0.2 percentage point downgrade from its February projection, as part of a broader reassessment of global economic prospects.
In its latest global outlook, the ratings agency expects the world economy to expand by 1.9% in 2025 and 2.3% in 2026 — a sharp cut from its previous forecast of 2.5% for both years — amid rising tariff barriers, geopolitical tensions and reduced investment confidence.
The downgrade follows mounting concern over protectionist US trade policy, US-China tensions and dampened investor sentiment in advanced economies.
Moody’s is still more optimistic than an assessment by the IMF a week ago, but more pessimistic than SA’s National Treasury.
The IMF expects SA’s economy to expand by just 1% this year, rising slightly to 1.3% in 2026. Global growth is forecast at 2.8% for 2025 — down from 3.3% in 2024 and well below its long-term average of 3.7%.
The IMF warned that these measures could permanently reconfigure global trade patterns and lower long-term growth rates.
According to the second version of the budget tabled by finance minister Enoch Godongwana on March 12 — which is under revision — the country’s economic growth projection for 2025 remained at 1.9%, after adjustments to the February budget.
Over the medium term, the Treasury forecast average annual growth of 1.8% in 2025-27, driven by higher investment and household consumption, supported by stable inflation, moderate employment gains and improving household balance sheets.
In November, S&P Global forecast SA’s GDP growth to rise to 1.4% in 2025-27.
Moody’s cites SA as one of Group of 20 (G20) emerging markets to feel the effects of a subdued global environment. The ratings agency on Tuesday said the Trump administration’s policy objectives of cutting the trade deficit and reshaping the US economy are playing out on multiple fronts: trade policy, government finances, immigration and regulation.
“Financial markets have responded with considerable volatility, declining when initial tariff announcements were made and rising after actions such as the pause on the higher tariff rates first announced, reductions in some specific tariffs and signs of the potential for negotiations,” Moody’s said.
Not knowing where these policies will settle can be even more damaging to economic activity than direct effects of tariffs because it hamstrings economic planning.
“Nevertheless, frequent changes in tariff announcements — and the potential for tariffs to reset to levels announced on April 2 in July — add a degree of unpredictability.”
The US is now expected to grow 1% in 2025, while China is forecast to expand 3.8%. Germany will see no growth next year while the UK is projected to grow 0.8%.
“Not knowing where these policies will settle can be even more damaging to economic activity than direct effects of tariffs because it hamstrings economic planning. Our forecast adjustments in this May 2025 update account for these effects on the global economy,” Moody’s said.
SA boasts the most advanced, broad-based economy in Sub-Saharan Africa and is rated Ba2 with a stable outlook. Moody’s is expected to announce its next credit rating review for SA this month, as part of its scheduled sovereign assessment cycle.
In February, Business Day quoted Johann Els, Old Mutual’s chief economist, who highlighted the significance of SA’s debt-to-GDP ratio, which is much lower than previous estimates by ratings agencies.
He noted that S&P Global Ratings had already upgraded SA’s credit outlook from stable to positive in 2024 and expected Moody’s and Fitch to follow suit.
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