The Mastercard Economics Institute’s ‘Economic Outlook 2025’ highlights a 1.7% GDP growth projection for South Africa, a 4.2% inflation rate, and increased consumer spending of 1.9%. It identifies opportunities for recovery through improvements in tourism, workforce participation, and financial inclusivity, while also acknowledging challenges from macroeconomic adjustments.
The Mastercard Economics Institute released its ‘Economic Outlook 2025’ report on March 11, 2025, which presents key themes that will influence South Africa’s economic landscape. The report anticipates a GDP growth of 1.7% for 2025, a slight increase from 2024’s 1.1%. While this growth is below the global average of 3.2%, improvements in electricity supply are expected to stabilize economic activity. Meanwhile, consumer spending is forecasted to rise by 1.9%, and consumer price inflation is projected to moderate to 4.2%, providing some relief to households and businesses.
The current economic growth in South Africa faces constraints from macroeconomic adjustments, including investment shortfalls and labor market pressures. Despite these challenges, policy adjustments are expected to support a gradual recovery, particularly in the tourism sector, which benefits from reduced uncertainty following the national unity government’s formation.
Khatija Haque, chief economist at Mastercard EEMEA, stated, “South Africa’s economic outlook for 2025 underscores opportunities for recovery through easing inflation, steady growth in consumer spending, and improvements in energy and tourism.” Furthermore, Gabriel Swanepoel, Country Manager for Southern Africa at Mastercard, emphasized their commitment to local payment solutions, enhancing transaction security and accessibility.
Notably, inflation across major global economies decreased significantly in 2024 due to lower durable goods prices. The Mastercard Economics Institute anticipates a global inflation rate of 3.2%, reflecting in South Africa’s expected decrease to 4.2% in 2025. This moderation in inflation allows consumers to focus more on essential goods and services amid ongoing price pressures.
Tourism remains a significant growth driver for South Africa, with the sector gradually recovering from the pandemic. The country’s unique position, leveraging natural and cultural resources without the capacity constraints seen in other markets, is crucial for future growth. This, coupled with infrastructural improvements and sustainable travel practices, is expected to facilitate recovery in tourism.
Migration trends show that inbound migration has driven a substantial increase in South Africa’s population since 2019, with net migration contributing a third of this growth. Moreover, remittances have surged significantly, indicating strong financial links between expats and their families in low-income countries. Continued digitization in payments systems enhances the efficiency and security of these remittances.
The report also highlights a gradual rise in women’s workforce participation within South Africa. Despite recent labor market pressures, this rate increased slightly by 0.17% from 2019 to 2023. The growth is attributed to job creation in traditionally female-dominated sectors and the increase in remote work opportunities, allowing for greater female engagement in the labor force, which is vital for economic stability in areas with low population growth.
The insights in the ‘Economic Outlook 2025’ report draw from a combination of public and proprietary data, representing a wide scope of economic activity.
The report from the Mastercard Economics Institute outlines a cautiously optimistic economic outlook for South Africa in 2025, highlighting a projected GDP growth of 1.7% and a moderation in consumer price inflation. The tourism sector is poised for recovery amidst improved political stability and consumer spending is expected to rise. Furthermore, the report emphasizes the importance of migration, remittances, and women’s workforce participation as essential components of economic resilience and growth.
Original Source: www.mastercard.com
