South African economy hits the brakes

The Bureau for Economic Research (BER) said South Africa’s economy will likely expand significantly slower than anticipated because of domestic political instability and US President Donald Trump’s tariff war.

The Stellenbosch-based research body on Tuesday lowered its growth forecast for South Africa to 1.5% for this year from a previous projection of 2%. That matches the median estimate of 27 economists in a Bloomberg survey.

BER Chief Economist Lisette Ijssel de Schepper said at a briefing in Johannesburg on Tuesday that tensions within the so-called government of national unity, formed after the African National Congress lost its outright majority in last year’s election, are a concern.

She said that the BER is worried about whether the coalition government will hold and function effectively.

A dispute over the national budget since February has almost caused it to collapse.

The spending plan has been scrapped twice because of opposition within the coalition over proposals to increase taxes and is now being revised after being suspended by the High Court.

The National Treasury is set to present its third iteration of the budget to lawmakers on May 21.

“In the second half of last year, we’re getting a bit more excited,” We saw some progress on the reform front, and the government was starting to add positively to growth momentum, De Schepper said. “That assumption has now shifted.”

The economy would have fared better this year had it not been for Trump’s 10% universal tariff that is upending global trade.

“Some of the puzzles of growth we’re moving into place, but Trump has obviously swooped some of the puzzle pieces straight off the table,” De Schepper said.