The North-West University (NWU) Business School’s Policy Uncertainty Index (PUI) for the first quarter of this year rose much further into negative territory to 78.6 from 65.7 in the fourth quarter of 2024, which is above the baseline of 50.

This rise to a record high was in response to various global and domestic developments over the past few months, and persistent negative factors again outweighed positive ones, says NWU Business School's Professor Raymond Parsons.

Externally, the global economic outlook in the first quarter of this year has been largely shaped by emerging tariff “wars” and heightened geopolitical tensions, leading to various global growth forecasts now being trimmed.

International organisation the Organisation for Economic Cooperation and Development, for example, recently reduced its growth forecasts for most major economies, including the US economy. On March 19, the US Federal Reserve also sharply cut its US growth projections for this year, he highlights.

“The more muted outlook on future global economic prospects, therefore, arises from a convergence of geopolitical risks, elevated economic uncertainty and unpredictability owing to economic policies of the Trump Administration and tariffs, and a resultant tangible repricing of risks in financial markets,” says Parsons.

Compared with the initial business optimism at the beginning of this year about the economic policies of the Trump Presidency, there is more negativity now. The recent emergence of discouraging US economic data, together with Trump’s erratic tariff decisions, have shaken investors confidence.

Further, the World Bank projects the GDP growth rate in sub-Saharan Africa being an average of 4.2% this year; however, for economic and political reasons, the bank sees the risks to sub-Saharan Africa as tilted in the downside, especially on the trade front.

On the positive side, South Africa’s high-frequency domestic data, such as consumer spending, retail sales and new-vehicle sales, indicate that an economic upturn has indeed been taking place, although the recovery so far has been slow and uneven.

GDP growth for this year is projected at about 1.6%, compared with 0.6% in 2024, he notes.

Additionally, at its meeting on March 20, the South African Reserve Bank's Monetary Policy Committee (MPC) opted to leave rates on hold. The MPC statement emphasised the mounting global and domestic economic uncertainty for its decision to pause. Inflation was nonetheless seen as contained for now.

The MPC trimmed its growth forecast for this year to 1.7% and saw downside risks to the growth outlook, he notes.

“Although total fixed capital formation is now rising faster since 2021, according to the recent Nedbank Capital Expenditure Project Listing Survey 2024, public sector investment plans have replaced the private sector ones as the main driver.

“Capital investment is the kingpin of the growth rate. The private sector revealed investment plans amounting to a decline of 4.3% in 2024, compared with 2023,” he emphasises.

The risks to better overall investment plans, says financial services firm Nedbank, "are tilted to the downside", dependent on the public sector’s ability to follow through on its plans and move more decisively towards lifting the long-standing, well-known constraints on economic growth and job creation, Parson reports.

For South Africa, accelerated structural reforms remain the best pathway to the Government of National Unity’s desired overall 3% growth target.

A strategic pivot in growth strategy will also help to create the economic buffers and resilience needed to deal with any external shocks. The country’s economic steermanship must, therefore, see that it stays on the right track in ways that ensure that tailwinds will outweigh headwinds this year, he advises.

Coping strategies may be needed to navigate what may well eventually become the ‘new normal’ economic uncertainty levels, but elevated levels of policy uncertainty remain reversible if the right actions are taken, Parsons adds.

“The first-quarter PUI reflected a sharp rise in policy uncertainty for external and internal reasons. Government policy and business strategies will need to be adapted to a new range of risks, as well as exploiting new or alternative economic opportunities.

“It will also be a strong test of the further collaboration still needed between the GNU and the private sector to meet these policy challenges,” he says.