“We are rather poor at making predictions,” once quipped legendary investor and philanthropist Peter Lynch, “...especially about the future.” His message is a good reminder for everyone who thinks about the economy. There are no crystal balls.
That doesn’t mean we shouldn’t forecast and prepare. In fact, uncertainty about what lies ahead creates the imperative to analyse likely scenarios and plan. In other words, prepare or perish.
This tricky task is all the more important in topsy-turvy times like these. Planet Earth in 2025 is defined more by variability than consistency. From governments and technology to culture and stock markets, change is the new normal.
So, what are the important forces that should guide our financial plans for the rest of 2025?
Big picture
Sim Tshabalala, Chief Executive Officer of the Standard Bank Group, summarises the landscape. “In 2025, we’re expecting the world economy to grow at about 3.3% and the economy of sub-Saharan Africa to grow at 4.2%.” There’s our first highlight: Africa is full of opportunity.
In South Africa, there are two ways to interpret the growth data. The 1.7% growth that Standard Bank anticipates for the year is, as Tshabalala puts it, “too low”. However, it’s double last year’s pace. Whether this glass is half full or half empty is a matter of opinion.
On inflation, a tough few years are gradually easing into better times. Post-COVID, inflation peaked at 7.5% for advanced economies in 2022. It should be more like 2.5% this year. That said, threats of tariffs and tax cuts in the US are upside risks.
In South Africa, inflation is back to around 3%, down from a painful 6.9% in 2022. Consumers are breathing a collective sigh of relief.
Trump-onomics
Standard Bank Group Chief Economist Goolam Ballim addresses perhaps the primary source of unpredictability in the global system today: the Trump administration. “Donald Trump is upending the global order that has been familiar for at least seven decades, and he’s upsetting the apple cart with respect to raising trade tariffs in terms of the relationships with America’s trade partners.”
Indeed, Trump’s trade-policy-by-tweet (or X post) keeps us all on our toes. However, this falls into the category of things we can’t control. Savvy investors will plan their finances to weather the storm by controlling the controllable. A diverse portfolio is an excellent bulwark against volatility like this. Shyft enables this by giving you access to everything from individual shares and ETFs to various currencies.
A terrific recent example of the benefits of diversification is gold. The metal has hit record highs as a safe-haven asset and recently reached the $3 000 per ounce milestone. Shyft offers a variety of offshore and local gold ETFs, invested in gold bullion, for those who want to jump on the bandwagon and hedge against market uncertainty.
Tshabalala explains Standard Bank’s cautionary note that Trump’s trade policies might backfire. “Standard Bank economists think that the worst affected economy would be the United States, where growth will be 1.1% lower than it would be without a tariff war. In this scenario, the world economy would grow about half a percentage point slower. Emerging economies would sacrifice just 0.2 percentage points in a tariff war and South Africa 0.1 percentage points. So the impact on Africa would be relatively mild.”
Several tailwinds aid Africa’s prospects. Tshababala cites a growing working-age population – in a context where many advanced nations face an ageing population – and abundant natural resources in a resource-hungry world. Demographics and resource endowments are robust drivers of long-term economic prospects.
AGOA, going, gone?
Regarding South Africa, the big date to watch is September 2025. This is when our African Growth and Opportunity Act (AGOA) membership is up for review. The act offers tariff-free access to the US market for a variety of export products. Removal from this would have significant implications, especially for car manufacturers in the Eastern Cape.
Ballim warns that Trump-onomics raises the risk of higher inflation and tempered growth in the coming quarters. China, arguably Trump’s primary target for tariffs, would suffer meaningfully from a trade war. “We expect China to grow at about 4.5% this year. That is down from 5% last year. That 0.5 percentage point is probably due to the trade war.”
The Brookings Institution reckons South Africa’s GDP would decline by 0.06% if AGOA were to go. That may seem like a minor loss, but in a country with such vast unemployment and inequality, this is enough to be taken seriously.
On the home front
Ballim is more upbeat about sub-Saharan Africa. Above-average growth will be “underpinned by increasing consumer spending, more stable public finances, and higher exports,” he argues. This is against the backdrop of ongoing risks, including global warming, geopolitics, and a Chinese slowdown.
Importantly, there is something resembling cautious optimism for South Africa – at long last! Ballim points to a “broad-based recovery driven by consumer spending, investment, and policy reforms.” Inflation, interest rates, energy supply, and the general business environment all appear to be on a positive trajectory despite a difficult few years. Still, a growth forecast of just 1.7% is modest and not enough to uplift a nation that needs it so desperately.
Despite a high level of political tension in recent years, labour action appears to be easing. Strikes took off in mid-2020 with the arrival of COVID-19 but seem to have peaked and settled into decline. Standard Bank doesn’t anticipate an uptick in protest or strike action this year.
Service delivery is an entrenched risk. South Africa’s infrastructure will remain under pressure for some time to come. Water shortages and load shedding are being addressed, but they continue to be disruptive and spark protest action.
Ballim emphasises the importance of President Ramaphosa’s leadership. Many economic hopes rest on a more assertive second term. The Government of National Unity (GNU) and a renewed sense of urgency have certainly given investors cause for some positivity. The Johannesburg Stock Exchange (JSE) reflects this. The JSE All Share Index is up more than 21% over the last year and 7% so far in 2025.
Artificial intelligence; real importance
No serious conversation about the economy in 2025 and beyond is complete without a look at AI. We should start with a harsh truth: AI is still hunting for profitability. Yes, share prices of AI stocks have been outstanding performers. However, many of the big AI players still need to demonstrate the ability to turn a profit. Investors will be watching this closely.
Shyft gives you a choice when wanting exposure to AI. From individual shares in big names like Nvidia and Meta to exchange-traded funds (ETFs) holding bundles of tech stocks, we’ve got you covered.
Planning and practice
Planning is only as good as the implementation. Putting financial plans into practice is all about having the right tools. That’s why Shyft brings together a variety of solutions in one place. Whatever your unique approach to dealing with the year ahead, Shyft can help. Be it US dollars or pound sterling, US tech stocks or a conservative bundle of industrial shares, we have you covered for your global money management and investment needs.
The views and opinions shared are for informational purposes only. They are not intended to serve as investment advice and do not represent the views or opinions of Standard Bank. This information should be used as a starting point for generating investment ideas and should not be relied upon as the basis for making investment decisions. The Standard Bank of South Africa Limited will not be responsible for the results of any investment decisions made based on the views provided.
