Moody’s projects South African economy to grow by less than 1.5% a year
South Africa’s economy is set to expand by less than 1.5% annually over the next two years, according to a new report by Moody’s Investors Service.
The forecast places the country far behind the sub-Saharan African average of nearly 5%, underscoring persistent structural challenges that weigh on Africa’s most industrialized nation, Sunday Times reported.
Regional growth outlook
Moody’s report on sub-Saharan African sovereigns notes that credit fundamentals across the region should remain broadly stable in the next 12 to 18 months. The agency projects median annual growth of about 4.7% in 2025–2026, up from the 3.8% average of the past decade. The expansion will be fueled by resilient domestic demand, large-scale infrastructure projects, and stronger contributions from mineral producers. Roughly 40% of economies in the region, including Rwanda, Ethiopia, and Senegal, are expected to grow at least 6% annually.
By contrast, South Africa, alongside Botswana and Gabon, is expected to underperform with growth under 3%. Moody’s currently rates South Africa at Ba2 with a stable outlook. The agency pointed to global headwinds—particularly weaker demand from China and indirect effects of U.S. tariffs—as factors that could weigh on the country’s performance.
Challenges and opportunities
The report highlights several constraints in South Africa, including succession risks, high borrowing costs, and social pressures that could erode fiscal discipline. While Moody’s anticipates gradual progress in narrowing budget deficits, the country’s sluggish growth contrasts sharply with regional peers.
For the broader sub-Saharan region, the outlook could brighten if governments improve tax collection, manage debt more effectively, and restore affordable access to global capital markets. However, debt affordability will remain a strain for about a quarter of sovereigns, with high interest payments continuing to absorb fiscal resources.
Conclusion
Moody’s findings underscore South Africa’s widening gap with its continental peers. With growth projected at less than 1.5% compared to nearly 5% regionally, the nation faces a stark choice: implement structural reforms to unlock potential or risk being left further behind as Africa’s economic momentum gathers pace.
It was earlier reported that South Africa inflation eases to 3.3% in August, raising hopes for rate cut.
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