The World Bank has updated South Africa’s economic growth forecast as substantial work has been done in our energy and logistics sector.
The bank updated SA’s GDP projection for 2025 from 1.3% to 1.8% and said that it expects growth to accelerate to 2% by 2027.
The World Bank, however, did note that SA will continue to struggle to keep up with reducing poverty and unemployment, despite the GDP growth.
“Such recovery, albeit modest, will be driven by improved infrastructure services and a relatively favourable external environment,” the bank explained.
“During this period, inflation is expected to remain under control, allowing a further easing of monetary policy that will encourage banks’ credits to businesses and households and, thus, stimulate economic growth.”
Junk Status
In late January, the Bank of America also noted that if South Africa shows higher GDP growth in 2025 and makes strides in lowering the debt burden, the country could move up two notches in its credit rating, placing it on the cusp of getting out of junk status.
This prediction comes from Tatonga Rusike, the Sub-Saharan Africa economist at the Bank of America.
Rusike noted that if South Africa provides “stronger GDP prints, then S&P (Standard & Poor) can review again in November 2025 and into 2026 to get rating upgrades”.
“So, we do see that the next three years if we do deliver on GDP growth and debt declining, it is possible to get up two notches in three years,” he explained.
“Growth of at least 1.5% of GDP on an annual basis over the medium term is good enough,” Rusike said.
Where do we stand now?
SA is currently rated below the investment grade with a stable outlook by all three major rating agencies.
S&P’s credit rating for South Africa stands at BB- with a positive outlook, and Fitch also rated the country at the same level or denomination, in September 2024.
Moody's credit rating for SA was last set at Ba2 with a stable outlook in April 2022.
South Africa is three notches below investment grade and in junk status. Essentially, if Rusike is correct and we move up two notches, we would just be on the verge of being out of junk status.
IOL BUSINESS