The World Bank has revised its economic growth forecast for South Africa, increasing its 2025 projection from 1.6% to 1.8% due to improvements in the country’s energy and logistics sectors.
These gains stem from structural reforms initiated by the government, according to the South Africa Economic Update report released on Tuesday.
The bank also expects Gross Domestic Group (GDP) growth to reach 2.0% by 2027, an upward revision of 0.4 points.
“Such a trajectory is based on continued political stability and sustained progress in providing power and freight transport services, building on the structural reforms currently implemented by the government in these two sectors,” the World Bank stated.
Additionally, inflationary pressures are expected to ease over the coming months, creating room for the South African Reserve Bank (SARB) to further lower interest rates. This, in turn, would stimulate economic growth by encouraging banks to extend more credit to businesses and households, the World Bank noted.
Last month, the central bank trimmed its main lending rate by 25 basis points to 7.5%, as inflation remained at the lower end of its target range of 3 - 6%.
Despite the improved outlook, the World Bank cautioned that the current growth rate would not be enough to significantly reduce the nation’s poverty and unemployment, which remain among the highest globally.
“A 1% increase in GDP growth is expected to generate only 30,000 to 50,000 jobs due to the low employment elasticity to GDP growth in South Africa,” the bank noted. The poverty and unemployment rates are therefore projected to remain high, above 60% and 30%, respectively, throughout the projection period.
The bank added that achieving the 5% to 6% annual growth rate needed to make a real impact on these numbers would be difficult in the short term due to “structural constraints that continue to impede the development of the private sector and the need for fiscal consolidation.”

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South Africa, where interest payments consume one-fifth of government revenue, must reduce its fiscal deficit from 6% to 4.6% of GDP by 2027 to achieve a sustainable public debt trajectory, the bank warned.
However, achieving this target will be difficult given the numerous risks facing the country, including a potential global trade war, a fragile political coalition, high crime and insecurity, and persistent social tensions.
The fiscal consolidation process could also face opposition from labour unions demanding higher wages and state-owned enterprises like Transnet SOC Ltd. and subnational governments seeking bailouts, the report added.
While the World Bank acknowledges progress in key sectors, it maintains that deeper reforms are needed to unlock faster economic growth and job creation in the coming years.