R127 billion vanished in two months
Finance Minister Enoch Godongwana’s adjustment to South Africa’s economic growth means the country’s GDP is expected to be R127.2 billion lower than initially predicted.
On 12 March 2025, Godongwana delivered his 2025 Budget speech after his first attempt, which was set to take place on 19 February 2025, was cancelled.
The finance minister told the nation that South Africa’s economic growth was projected to average 1.8% over the next three years.
He was upbeat about this year’s real gross domestic product (GDP) growth, saying real economic growth was forecast to increase to 1.9% in 2025.
He said improved investor confidence, stable electricity supply, lower interest rates, and a declining risk premium supported this higher economic growth.
However, the story had changed two months later, on 21 May 2025, when Godongwana delivered his new 2025 Budget.
“As global growth has faltered, South Africa’s economic outlook has also weakened, with GDP expected to grow by only 1.4% in 2025,” he said.
“Since the 2025 Budget Review publication in March, greater uncertainty and trade fragmentation have contributed to a weaker economic outlook.”
South Africa’s GDP is now forecast to grow at an average of 1.6% between 2025 and 2027, significantly lower than the 1.8% forecast two months ago.
Although South Africa benefits from a more stable power supply, structural constraints limit economic growth, and downside risks have broadened.
The global outlook has also deteriorated due to greater policy volatility. Global inflation, however, continues to ease, albeit with pauses in interest rate cuts by many central banks.
This means South Africa’s gross domestic product in the current financial year is expected to reach R7,872.2 billion instead of the initially projected R7,999.4 billion.
Simply put, the size of South Africa’s economy will be R127.2 billion smaller than what Godongwana projected in March 2025.
The table below provides an overview of the difference between South Africa’s March 2025 and May 2025 GDP estimates.
| Measure | March 2025 | May 2025 | Difference |
| 2025 Real GDP Growth | 1.9% | 1.4% | -0.5% |
| 3-year Real GDP Growth | 1.8% | 1.6% | -0.2% |
| GDP | R7,999.4 billion | R7,872.2 billion | -R127.2 billion |
Impact of slower economic growth
The impact of slower-than-expected economic growth is significant, especially as it will affect government revenue and raise debt.
Godongwana said the fiscal strategy remains on track so that the government spends less on debt-service costs and more on critical public services.
“Debt is projected to stabilise at 77.4% of GDP in 2025/26,” Godongwana said in his May 2025 Budget Overview.
However, many economists cautioned that the finance minister is too optimistic about South Africa’s economic growth.
The International Monetary Fund (IMF) cut its economic growth forecast for South Africa to 1%, as US President Donald Trump’s tariffs wreak havoc on financial markets.
Efficient Group chief economist Dawie Roodt also said South Africa’s economic growth this year will be lower than initially anticipated and expects GDP growth of 1% or lower.
“This growth is very bad, as the finance minister depends on economic growth to fund South Africa’s large state machinery,” Roodt said.
Without the National Treasury’s expected 1.4% economic growth, the country will not meet its planned revenue collection.
If the South African economy grows only by 1%, as the IMF and Roodt expect, the 2025 Budget will have a big hole.
The government’s deficit will be higher than anticipated, forcing the state to borrow more money and further increasing the already high debt-to-GDP ratio.
Roodt warned that the country will face a financial disaster unless the government addresses this unsustainable debt burden.
Real GDP growth rate
Main budget revenue and expenditure
Revised debt-to-GDP ratio
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