South Africa’s 2026 economic growth forecast takes a major knock

South Africa’s economic recovery is facing another setback, with government and major financial institutions expecting the economy to grow by just 1.2% in 2026.

The latest projections show that the country is heading for another year of sluggish economic growth, despite earlier hopes that improving business confidence, electricity reforms and lower inflation would help accelerate the recovery.

The National Treasury has reduced its 2026 growth forecast to 1.2% down from the 1.6% projected in February’s national Budget. The South African Reserve Bank has also settled on a 1.2% growth forecast.

At the beginning of 2026, there was greater optimism about the country’s economic prospects.

The Reserve Bank initially expected the economy to grow by 1.4%, with Governor Lesetja Kganyago pointing to improving economic activity and four consecutive quarters of growth.

However, the outbreak of the US and Iran conflict changed the outlook pushing up energy costs and creating additional pressure on businesses and consumers.

The Reserve Bank subsequently reduced its growth forecast to 1.2% in May and maintained that projection in its October Monetary Policy Review.

South Africa’s weak growth outlook is also reflected in forecasts from international financial institutions and credit rating agencies.

The International Monetary Fund is among the least optimistic, expecting South Africa’s economy to expand by just 1% in 2026.

Moody’s is more optimistic, forecasting growth of 1.6%. However, the overall average of these projections is approximately 1.2%.

The latest economic difficulties were reflected in South Africa’s second quarter GDP figures.

Statistics South Africa reported that the economy contracted by 0.2% in the second quarter of 2026, marking its first quarterly contraction in almost two years.

The decline was driven by poor performances in several important sectors:

Higher fuel prices and the impact of the Middle East conflict contributed to the difficult economic environment.

Despite the disappointing 2026 outlook, financial authorities expect economic growth to improve gradually over the coming years.

National Treasury expects growth to reach 1.6% in 2027 and 2% by 2029.

The Reserve Bank also expects growth to approach 2% by 2029, provided structural reforms continue and major economic constraints are addressed.

However, reaching these targets will depend on improvements in electricity supply, transport infrastructure, logistics, investment and the broader business environment.

Reserve Bank Governor Lesetja Kganyago has warned that South Africa remains far from achieving the stronger economic growth needed to meaningfully improve living standards and employment.

For ordinary South Africans, the concern is that prolonged weak growth means fewer opportunities for job creation, limited business expansion and continued pressure on household incomes.

With the country’s 2026 growth forecast now sitting at just 1.2%, the hoped for economic recovery is taking longer than initially expected.

Sources: National Treasury, South African Reserve Bank and Statistics South Africa, Bad news about South Africa’s economic growth in 2026 – Daily Investor

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