By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
Global economic growth outlook stays subdued amid policy adjustments
The International Monetary Fund's (IMF) October 2025 World Economic Outlook (WEO) provided marginal updates to global growth forecasts but continued to stress the need for coherent policy. This will be a challenge for many countries as they try to navigate the reconfiguration of political and trade relations, deepening defence vulnerability, advancing climate change, as well as financial market turbulence. For emerging markets, pressing near-term issues could affect the speed of reforms. The temptation to employ far-reaching industrial policies will be profound, but policymakers are encouraged to consider its tools carefully - upholding longer-term efforts of stabilising macroeconomic balances and building buffers. We summarise below.
The global economy faces shifting rules and uncertain growth as new policies emerge. While United States (US) tariffs initially increased materially, later agreements eased effective tariff rates, but instability remains. Advanced economies have generally reduced aid and tightened borders, while several adopted fiscal stimulus, raising concerns about debt sustainability and rising competition for savings. This is as emerging markets will also seek to attract capital to support the reform agenda, stave off debt and liquidity distress, and support vulnerable sectors and households.
Markets worldwide are adjusting to more protectionism and fragmentation, leading to weaker medium-term growth. The April 2025 WEO lowered the global growth projection for 2025 by 0.5-percentage points (ppts) to 2.8% but later raised it to 3.0% after tariff reductions and early 2025 data showed robust economic activity. Nevertheless, as import front-loading fades, and trade and labour market indicators soften, we should see growth slow. This would be compounded by US consumers facing higher prices from tariffs and lower immigration possibly limiting output in the broader advanced economy space.
Current forecasts suggest that global growth will slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026, staying resilient though below pre-2025 expectations. Advanced economies are projected to grow around 1.5% in 2025 and 2026, with emerging markets slightly above 4%. Inflation is expected to fall globally, though the US will see persistent pressure.
World trade is anticipated to rise by an average of 2.9% in 2025 and 2026, slower than in 2024 due to continued fragmentation. Risks remain tilted downward, including policy uncertainty, more protectionism, tighter immigration, financial vulnerabilities, possible tech stock declines, weakening of institutions, data reliability issues, and commodity price shocks.
However, successful trade deals, renewed reform, and productivity gains, particularly from the adoption of Artificial Intelligence, could improve prospects. Policymakers are prompted to focus on credible, sustainable strategies: clear trade rules, prudent fiscal planning, balanced monetary policy, and robust institution-building. For low-income nations, the IMF stresses that domestic resource mobilisation grows more important as external aid falls. Scenario planning and clear policy playbooks can help navigate ongoing uncertainty. Industrial policy is seen as another lever to provide stability and support critical sectors, but without a targeted approach and continued investment in productivity, inefficiencies and considerable fiscal costs could accrue - to the detriment of the long-term growth trajectory.
Week in review
The leading business cycle indicator lifted by 1.6% m/m to 115.5 points in August, which reflects 3.6% annual growth versus 1.2% previously. This increase was supported by gains in eight of the ten available components, with the largest contributions coming from a rise in the amount of residential building plans approved as well as an acceleration in the growth rate in the job advertisements space. The largest negative contributors were a weakening in RMB/BER Business Confidence Index, and a narrower interest rate spread.
Headline inflation was 3.4% y/y in September, a slight increase from 3.3% in August. Monthly pressure was 0.2% driven by core inflation, which was 0.3% m/m and 3.2% y/y, up from 3.1% previously. Average fuel prices fell by 0.3% m/m and were 2.2% lower than at the same time last year. Food and NAB inflation recorded 4.5% y/y, down from 5.2% previously. Monthly deflation of 0.2% reflected meat and cereals inflation that was mitigated by fresh produce deflation. We see headline inflation lifting to 0.3% m/m and 3.8% y/y in October. This will reflect the hike in average fuel prices, pushing the year-on-year number out of deflationary territory. Seasonal food price pressures could compound the upward pressure to headline inflation. Assuming no unexpected disruptions, headline inflation is projected to stay below 4% over the coming year.
Week ahead
On Wednesday, data on Private Sector Credit Extension (PSCE) for September will be released. PSCE increased slightly to 5.9% y/y in August, from 5.8% y/y in July. Although still subdued, household credit growth was mainly driven by car finance and credit cards. On the other hand, corporate credit led the surge, driven by an uptake in general loans, mortgages, as well as vehicle finance. Nevertheless, global uncertainty and weak local growth have not encouraged robust structural investment, and sentiment is downbeat.
On Thursday the producer inflation data for September will be released. In August, producer inflation accelerated to 2.1% from 1.5% in July. On a monthly basis, prices rose 0.3%, easing from 0.7% in the prior month. Food prices continue to drive headline pressure, with the main contributors in this category being meat and meat products, fruit and vegetables and oils and fats. While still negative, the rate of decrease in paper and printed products as well as coke and petroleum-related products, has slowed.
On Friday, the trade balance for September will be published. The trade balance recorded a lower surplus in August of R4.0 billion versus R19.6 billion in July. The August outcome reflected a 6.8% m/m decrease in exports while imports increased by 1.9%. Year-to-date, the trade surplus stands at R101.8 billion versus R121.4 billion in the comparable period last year. This reflects exports rising by 2.2%, though slower than the 4.7% import growth, resulting in a softer year-to-date trade surplus.
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