The global economy has managed admirably through a series of shocks over the past few years – but 2025 is likely to be defined by shifts in monetary and fiscal policy and a move toward equilibrium rates for growth and inflation.
These are the headline findings from the Mastercard Economics Institute’s new “Economic Outlook 2025”, its annual report identifying the themes that will shape next year’s economic landscape.
In South Africa, GDP in 2025 is projected to grow by 1,7% year over year, slightly below the global average of 3,2% but up from 1,1% in 2024.
This growth is supported by improved electricity supply and efforts to stabilise economic activity.
Meanwhile, consumer spending in the country is predicted to rise by 1,9%, and consumer price inflation is likely to moderate to 4,2%, creating much-needed relief for households and businesses.
Economic growth is currently constrained by macroeconomic adjustments, including investment shortfalls, structural reforms, and labour market pressures.
However, policy adjustments are expected to support a gradual rebound.
The country’s tourism outlook has improved following the formation of the national unity government which reduced uncertainty and boosted confidence, albeit from low levels.
“South Africa’s economic outlook for 2025 underscores opportunities for recovery through easing inflation, steady growth in consumer spending, and improvements in energy and tourism. By fostering financial inclusion, workforce participation, and innovation, the economy can set a course toward sustainable progress,” says Khatija Haque, chief economist: EEMEA at Mastercard.
Key findings from the report include:
Pricing priorities
Inflation across major economies eased significantly in 2024, underpinned by lower prices of durable goods and reduced inflation for nondurable goods.
The Mastercard Economics Institute predicts trimmed global inflation at 3,2% (removing the top and bottom 10% outliers).
This global trend is reflected in South Africa, where inflation is forecast to moderate to 4,2% in 2025, down from 4,7% in 2024 based on the consumer price index.
While the decline offers welcome relief, elevated price levels still influence consumer behaviour.
Consumers are expected to focus spending on essential goods and services, while also opting for more affordable versions of discretionary items. This trend of ‘trading down’ reflects global purchasing behaviours amid lingering price pressures.
Engines of growth – Tourism
In South Africa, tourism represents a significant growth opportunity. While the country’s international tourism sector has yet to fully recover to pre-pandemic levels, it remains a key economic driver.
Improved stability following political reforms and enhancements in electricity supply have bolstered confidence, albeit from low levels.
According to the UN Tourism statistics, South Africa is uniquely positioned to capitalise on its natural and cultural assets without the capacity constraints observed in other markets.
Sustained efforts to enhance infrastructure and promote sustainable travel practices will be instrumental in accelerating recovery.
Migration and money
The last few years revealed significant shifts in people and, by extension, capital. Inbound migration greatly enriches the region’s human capital.
In South Africa, net migration contributed to a third of the overall increase in the population since 2019, reflecting the country’s position as a destination for individuals seeking opportunities within its borders.
Migration also generates substantial remittances, which serve as a lifeline between expats working in thriving economies and their families from low- and middle-income communities in developing economies.
The report highlighted a study from the World Bank that global remittances surged from $128-billion in 2000 to $857-billion in 2023, with an estimated growth of 3% in 2024 and 2025.
Economic recovery and local reforms are expected to sustain remittance growth through 2025, while the continued digitisation of the payments industry allows recipients to shift to digital and mobile channels, resulting in considerable cost efficiencies, security and convenience.
The rise of the SHEconomy
Women’s workforce participation in South Africa reflects an important, albeit gradual, transformation. The female labour force participation rate saw a marginal growth of 0,17% from 2019 to 2023, despite broader labour market pressures that have seen male participation rates decline by 2% over the same period.
There are several potential explanations for this phenomenon. For one, women’s labor force participation is structurally lower compared to men globally, providing a longer runway for growth.
This rise of remote work expands job opportunities for women. This dynamic is expected to remain true in 2025, leading MEI to anticipate that this trend will persist.
South Africa’s experience mirrors global trends where growth in female participation is linked to job creation in sectors like healthcare and education and the rise of flexible and remote work.
This shift is critical for economies with low population growth, as increased female participation counterbalances workforce declines and drives household income growth.