SA’s economic recovery is expected to have continued at a modest pace in the second quarter with real GDP growth seen accelerating slightly after a tepid 0.1% rise in the first quarter.
While the anticipated rebound signals some improvement analysts caution the economy remains stuck in a “muddling along” phase — unable to break free from its prolonged low-growth trajectory, constrained by weak fixed investment, global trade tensions and persistent sector-specific headwinds.”
“We must not expect any fireworks,” Prof Raymond Parsons of the NWU Business School told Business Day. “The incipient economic recovery is still uneven and struggles to gain strong momentum in the face of both global and domestic challenges.”
Parsons noted high-frequency data for the second quarter has painted a mixed picture, with some sectors showing promise, while others have continued to lag. He estimates second-quarter growth at 0.3%, contributing to a full-year growth forecast of just 0.9% for 2025, well below the government’s medium-term goal of 3%.
A key drag on growth continues to be gross fixed capital formation (GFCF), or investment in infrastructure and productive assets, which is critical for job-rich growth, and “which various surveys indicate did weaken further in early 2025,” Parsons said.
According to a recent Nedbank survey, GFCF is forecast to contract by 1.5% in 2025 and grow by just 2.2% annually over the next three years — too low to meaningfully lift potential growth.
“This is not good enough if SA is to achieve the [government of national unity’s] target of 3% growth in the medium term,” Parsons said.
“A telling indicator is that SA corporates are estimated to be sitting on R1.5-trillion in cash waiting to be unlocked by greater policy certainty, accelerated policy reforms and intensified public-private sector partnerships opening up investment opportunities.”
Independent economist Elize Kruger expects second-quarter GDP to grow by 0.6% quarter-on-quarter (seasonally adjusted) and 0.8% year-on-year. She now forecasts full-year GDP growth at 1.0% — “below population growth and too low to stimulate meaningful job creation.”
Kruger noted the mining and manufacturing sectors likely rebounded in the second quarter but largely from a low base after steep contractions in the first quarter.
“Both sectors remain under pressure, while the impact of the higher US import tariffs could harm some of the sub-sectors of the manufacturing sector in coming months.”
The retail sector is also expected to have contributed positively to GDP, aided by structural tailwinds. Headline inflation remains well under control and this has allowed the Reserve Bank to cut interest rates — a welcome relief for households and corporates alike, Kruger noted.
“With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real increases in salaries, which are supporting consumer spending.”
Oxford Economics senior economist Jee-A van der Linde concurred. “Although momentum in retail trade sales has stalled since the start of 2025, we still expect the retail trade sector to contribute positively to [second quarter] GDP.”
This, along with gains in mining and manufacturing, led Van der Linde to revise his second quarter GDP growth forecast slightly higher to 0.4% quarter on quarter (seasonally adjusted annualised rate).
Electricity and water, construction and financial services sectors are all forecast to post small positive gains in the second quarter.
However, according to Kruger, transport and communication appear to have reversed its first quarter momentum with early data pointing to a 1.3% quarterly contraction.
The agricultural sector remains a wild card. According to Wandile Sihlobo, chief economist at Agbiz, the industry may show a slight slowdown in the second quarter, after a 15.8% quarter-on-quarter growth (seasonally adjusted) in the first quarter.
“This is because of the late harvest and deliveries to silos of grains as the season was late by roughly a month and a half due to excessive and prolonged rains. Still, this won’t change the view that on an annual basis, 2025 is a recovery period for SA agriculture,” Sihlobo said.
According to Van der Linde, Oxford Economics is keeping its full-year growth forecast unchanged at 0.8%, “as the disruptive impact of US tariffs will continue to undermine domestic economic activity in [the second half of the year], particularly private sector investment, which declined by 1.7% quarter on quarter in [the first quarter of] 2025,” he said.
“Moreover, the slump in second-quarter business confidence, combined with uncertainty stemming from domestic politics and US tariffs, suggests that private sector investment will remain depressed in the near term.”
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