GDP decline: Is South Africa’s economic recovery derailed or delayed? Experts weigh in

South Africa's economic recovery has experienced an interruption rather than a complete derailment, according to experts following a surprising decline in the second quarter GDP. The gross domestic product dropped by 0.2% in Q2, following a 0.4% increase in the first quarter and marking the economy's first contraction since the third quarter of 2024.

The decline was primarily driven by mining, which contracted by 3%, and manufacturing, which fell by 1.8%. Despite these setbacks, seven other industries expanded, though growth was generally modest. The decline of 0.2% in Q2 was weaker than the consensus expectation of 0.1%. Experts attribute this to global energy shocks, weak investment, and pressure on key industries.

Inflation remains a concern, with experts predicting it to stay above 4% into early 2027. While some sectors, such as electricity, gas, water, and government services, performed well, others, including agriculture, construction, transport, finance, personal services, and household spending, also grew. Experts expect interest rate increases to continue, with a 25 basis point increase anticipated later this month.

While the contraction may delay the recovery, experts believe it is not the end of it. The economy may grow at around 1.2% this year, slightly lower than the initial expectations.