South Africa exceeds expectations

South Africa’s economy grew at a faster pace in the first quarter, shrugging off the initial headwinds from the Iran war, even as manufacturing continued to lag.

Gross domestic product grew 0.5% in the three months through March, compared with growth of 0.4% in the prior quarter, Statistics South Africa said in a report released in the capital, Pretoria, on Tuesday.

That beat the 0.3% median estimate of 15 economists in a Bloomberg survey. 

On a year-over-year basis, the economy grew 1.9% in the first quarter compared with 0.8% in the previous three months. Economists in the survey had predicted 1.7% growth.

Growth was broad-based across industries except for manufacturing, which shrank 0.8% between the fourth quarter of last year and the first quarter of this year.

Still, the Middle East conflict presents a potentially significant headwind.

Fuel and fertiliser prices have surged since the war began on 28 February, effectively closing the Strait of Hormuz, a key passageway for a fifth of the world’s seaborne oil and liquefied gas.

South Africa is a net importer of oil, and the conflict has pushed gasoline prices to a record, denting household incomes and clouding an economic outlook that had begun to brighten after more than a decade of underperformance. 

The central bank last month downgraded its 2026 growth projection to 1.2% versus a previous estimate of 1.4% and raised interest rates to contain inflation for the first time in three years.