Moody’s Ratings expects SA’s real GDP growth to rise to about 1.6% next year, the most optimistic forecast among the three major ratings agencies, but warned that stronger growth will be needed to reduce debt sustainably.
“Our perspective is that while growth will remain about 1% this year, that will gradually improve to 1.6% next year,” said Evan Wohlmann, senior credit officer in Moody’s sovereign ratings team and lead analyst for SA’s sovereign rating, at a press briefing.
This is well below the nearly 5% growth projected for sub-Saharan Africa in an earlier Moody’s report.
“Our baseline expects reform progress, particularly on logistics, to continue, but the extent of private investment in new logistics infrastructure is unlikely to be sufficient to materially raise growth potential beyond 2%.”
Still, Moody’s 1.6% projection is the rosiest among the international ratings agencies. In its latest report, Fitch Ratings says it expects the country’s real GDP to grow just 1.2% annually in 2025-27, with S&P Global Ratings expecting growth to rise to an average of 1.5% in 2026-28.
Moody’s rates SA Ba2 with a stable outlook, indicating a balance between upside and downside risks to the rating. The next rating announcement is scheduled for December 5.
Reforms critical to unlocking potential
Asked what could help SA secure an upgrade, Wohlmann highlighted continued progress on structural reforms, particularly in the logistics sector.
- Moody’s expects SA’s GDP growth to rise to 1.6% in 2025, the most optimistic of the major ratings agencies.
- Growth remains well below Africa’s average, reflecting deep structural constraints.
- Reform progress in logistics and infrastructure is key to unlocking faster growth.
- Treasury’s fiscal discipline is noted, but higher growth is needed to stabilise debt.
- SA’s Ba2 stable rating could improve with visible reform gains, or slip if progress stalls.
“We expect to see more visible progress on private sector involvement in the country’s ports and rail network in the coming months,” he said, referring to Operation Vulindlela, the government’s joint reform initiative.
“In terms of what could move the rating down, that would most likely occur if the country’s economic growth prospects were to sustainably deteriorate from their current levels, which are still quite subdued, and in turn that resulted in a sustained decline in our assessment of SA’s fiscal strength. And this could occur due to setbacks in implementing structural reforms, indicating that policy effectiveness is weaker than what we expected.”
Treasury’s fiscal measures praised
Growth prospects remain critical to the fiscal outlook. According to Wohlmann, the National Treasury “has shown a clear commitment to fiscal consolidation, and this commitment was evident through all three iterations of the budget earlier this year”.
That commitment has recently been reinforced by new cost-containment measures in the public sector. This week, the department of public service & administration, with the National Treasury, introduced an incentivised early retirement and voluntary exit programme for public servants, aimed at gradually reducing the wage bill without resorting to forced retrenchments.
The scheme allows qualifying employees aged 55 to 63 to retire early or exit voluntarily without pension penalties, with Treasury providing central funding support for departments implementing the transition.
“But in our view, it will be challenging for SA to achieve a meaningful decline in general government debt without significantly higher economic growth,” Wohlmann said.
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