SA’s economy gets R371bn boost on paper as Moody’s upgrade looms

Investec's Annabel Bishop does not expect an interest rate increase at the South African Reserve Bank’s November meeting.

South Africa’s revised economic figures could bring forward a credit-rating upgrade, with Investec chief economist Annabel Bishop expecting Moody’s to lift the country’s rating in the near term.

The revision has lowered the country’s projected debt-to-gross domestic product (GDP) ratio, a key measure used by credit rating agencies when assessing its ability to repay debt.

Statistics South Africa’s rebasing and benchmarking exercise lifted the measured size of the economy in 2022 from R6.67 trillion to R6.99 trillion currently, an increase of around 5%. GDP levels were revised upwards for every year from 2018 to 2023, by an average of 4.2%.

Part of the increase in the measured size of the economy reflects previously under-recorded activity, including illegal mining and online illegal gambling.

Statistics South Africa’s revised estimates also capture activities such as e-hailing services and electricity generated by farms and households more fully. The changes mean the official figures provide a more complete picture of economic activity that was already taking place; they do not represent a sudden increase in production.

The revision lifted the value of South Africa’s economy in 2025 by 5.3%, according to Bishop.

Yet, the revision does not mean that households are better off or that the cost of living has fallen. Johann Els, senior economist at PSG, says the larger economy “does not suddenly make South Africa richer or solve the growth problem”.

According to Statistics South Africa, the largest upward revision was in mining, where the measured value increased by 12.5%, mainly because of the inclusion and improved coverage of illegal mining. Finance, real estate and business services increased by 9.1%, primarily because of improved estimates for owner-occupied housing.

Els says the revision improves the ratios used to assess the country’s public finances, but does not resolve the underlying challenges facing the economy. His revised estimates put the current-year gross debt ratio at 74.5%, compared with the previous estimate of 78.2%. The consolidated budget deficit is estimated at 3.7%, down from 3.9%.

The revised historical figures also show that economic growth in 2025 was lower than previously estimated, at 0.9% rather than 1.1%, according to Els. The larger measured economy therefore does not indicate that economic growth has accelerated.

However, a larger measured economy improves the country’s debt-to-economy ratio because government debt is measured against a bigger economic base. This makes the debt burden look more manageable to credit rating agencies, even though the revision does not mean government owes less money.

Bishop says the revised figures lower South Africa’s debt-to-GDP ratio by an average of four percentage points over the medium-term budget period. The ratio is now expected to reach about 73% by the 2028/29 financial year, compared with the previous projection of 77.5%.

The budget deficit is also expected to decline to 3% of the economy more quickly than previously forecast, according to Bishop. These changes reflect the effect of measuring the economy at a higher value, rather than an equivalent reduction in the amount of government debt or spending.

Credit rating agencies assess a government’s ability to service its debt. Bishop says the lower debt ratio should hasten South Africa’s return to investment grade, with a Moody’s upgrade expected in the near term.

South Africa remains in junk status. A return to investment grade would broaden the pool of investors able to hold its government debt and could reduce the cost of borrowing for the state.

The potential benefit for consumers would depend on whether lower government borrowing costs feed through into the wider economy. The revised figures do not, by themselves, change the interest rates households pay on mortgages, vehicle finance or other credit.

For consumers, inflation and interest rates remain more immediate influences on household finances. Bishop says annual consumer price inflation rose to 4.5% in September from 4.4% in August, following a R1.34 a litre increase in petrol prices and higher housing and utilities costs. Core inflation, which excludes food and fuel, was 4%.

Bishop expects inflation to move towards 5% by the end of 2026, with higher fuel prices contributing to the increase. She does not expect an interest rate increase at the South African Reserve Bank’s November meeting, with reductions in the general fuel levy in November and December expected to provide some relief.