As nations recalibrate priorities and power structures shift in 2025, the interaction between domestic agendas and global disruptions will leave a lasting imprint. These 10 trends capture the factors that are expected to influence markets and economies in the year ahead:
1. Donald Trump’s second act
Trump’s second-term agenda promises significant economic shifts, including stricter border controls and mass deportations, which risk labour shortages. Proposed tax cuts aim to boost consumer spending and corporate investment, while deregulation in energy and finance raises environmental and stability concerns. On foreign policy, the domestic focus of the Trump administration could necessitate increased military spending elsewhere, while proposed high tariffs on Canada, Mexico and Brics nations underscore a protectionist trade strategy, pressuring key trading partners to negotiate.
2. Redrawing boundaries
Trump’s recent statements on Canada, the Panama Canal and Greenland signal a pivot towards aggressive expansionism and economic leverage, redefining US influence across North America. This confrontational approach underscores a return to doctrines of old, where territorial ambitions and economic dominance were tools to assert US primacy in the western hemisphere.
3. Disinflation roadblocks
Trump’s proposals for aggressive tariffs and mass deportations also risk driving up costs. Though deregulation might reduce compliance costs, it’s unclear if consumers will benefit. Caution over structural factors, complicating efforts to sustain lower inflation, has been evident in the market’s steady pricing out of further interest rate cuts in the US.
4. China’s counterplay
China’s recovery efforts in 2025 will be shaped by Beijing’s response to Trump’s tariffs. While rare earth metals may escape tariffs due to their strategic importance, broader trade tensions could weigh on growth. Recent stimulus efforts have bolstered markets but face limits in addressing a weak social safety net and a fragile property market.
5. Ceasefires and consequences
The Israel-Hezbollah ceasefire, brokered by the US and France in November, marks a key diplomatic win for Trump as he begins his second term. Trump’s close ties with Israel align with his strategy of countering Iranian influence while bolstering his image as a peacemaker. While the agreement offers short-term stability, doubts nevertheless linger over its sustainability amid regional tensions. His bold claims to resolve the Ukraine-Russia conflict within a reconsidered “six months” signal ambition but risk undermining long-term stability.
6. The GNU’s moment of truth
Declining support for populist opposition parties reflects a growing preference for stability in South Africa, yet unmet expectations could trigger a backlash. Inclusivity concerns persist amid high unemployment, rising living costs and stagnant real wages. The GNU must prioritise job creation and equitable growth to maintain support in upcoming elections.
7. Private sector push
South Africa’s economic recovery in 2025 hinges on private sector participation, particularly in energy, logistics and water. Eskom’s improved energy availability factor, exceeding 60% with no load-shedding since the end of March 2024, marks progress. However, Transnet’s R2.2bn loss for the first six months of financial 2024/2025 underscores how security and ageing infrastructure challenges are hindering logistics, despite a slight improvement in port and railway volumes. Moreover, pressing water scarcity issues, worsened by underinvestment and inefficiencies, require urgent attention.
8. Turning optimism into action
The stable transition to a GNU has bolstered local investor sentiment, with fewer manufacturers citing the political environment as a barrier to investment, according to the Q4 2024 Absa Manufacturing Survey conducted by the Bureau for Economic Research. However, despite these improvements, tangible infrastructure investment to drive growth remains limited. Progress towards exiting the Financial Action Task Force greylist, potentially by October 2025, and a positive outlook shift from neutral on South Africa’s sovereign rating from S&P Global Ratings further enhance optimism, promising to boost the country’s investment appeal.
9. Balancing the books
Despite achieving a primary surplus, funding state entities, managing civil servant wage demands and expanding social aid remain risks to South Africa’s fiscus. Wage negotiations remain contentious, with unions rejecting the revised offer of a 5% increase for 2025/2026 and changing their demand to 6%. Encouragingly, reforms in network industries and greater private sector participation are beginning to unlock growth, offering a glimmer of hope for South Africa’s fiscal trajectory.
10. South Africa’s resilience tested by global turbulence
While South Africa enjoys relative political stability, its economy remains vulnerable to external shocks, including geopolitical tensions, volatile commodity prices and slowing growth among key trading partners. Despite a projected decline in South Africa’s headline inflation to 4.2% in 2025 and the potential for up to two rate cuts, upside risks from a volatile rand, rising oil prices and global protectionism may constrain monetary policy flexibility.
The global narrative of 2025 will likely be defined by bold leadership and shifting alliances. Trump’s audacious policies and South Africa’s GNU, navigating a precarious path of inclusivity and reform, highlight a challenging backdrop for the local economy. As the year unfolds, the ability to balance domestic priorities with global realities will be crucial in navigating uncertainty and laying the groundwork for sustainable progress.
* Packirisamy is chief economist at Momentum Investments
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