JOHANNESBURG – South Africa’s economy is showing signs of a gradual recovery, with growth expected to strengthen modestly over the next two years despite rising political risks and persistent structural challenges.
According to the Reuters Econometer for November, South Africa’s gross domestic product (GDP) is projected to grow from an estimated 1.2% in 2025 to 1.5% in 2026, reflecting a slow but steady improvement in economic activity.
The outlook is contained in a new global report, Economies At A Glance, which provides forecasts and a calendar of key economic events across major economies. The report describes 2026 as a year characterised by cautious monetary easing, fiscal consolidation and elevated geopolitical risks, with global growth stabilising in developed markets while emerging Asia continues to drive overall expansion.
Drivers of recovery
South Africa’s moderate growth outlook is underpinned by several domestic factors, including easing monetary policy, ongoing reforms to stabilise electricity supply, and efforts to reduce long-standing logistics bottlenecks.
“These developments are expected to support investment and consumption,” the report notes, particularly as improved power availability and transport efficiency reduce costs for businesses and households.
Political risks ahead of elections
Despite the improving economic indicators, the report warns that political risk is rising as the country moves closer to the 2026 local government elections.
“Voter sentiment remains highly sensitive to poor service delivery outcomes and economic conditions,” the report says, adding that potential shifts in municipal control could disrupt policy continuity, especially in sectors responsible for utilities and infrastructure.
Such uncertainty, it cautions, could weigh on investor confidence and complicate local governance at a time when consistent implementation of reforms is critical.
Inflation and monetary policy
On inflation, the Reuters Econometer consensus expects headline inflation to increase from 3.3% in 2025 to 3.6% in 2026, largely due to base effects, before easing again to an estimated 3.4% in 2027.
The economic calendar for 2026 highlights several key dates for South Africa, including the release of fourth-quarter 2025 GDP figures on March 10, the State of the Nation Address on February 12, and the National Budget later in February.
Interest rate decisions by the South African Reserve Bank (SARB) are scheduled throughout the year, with meetings planned for January, March, May, July, September and November 2026. Local government elections are expected to take place between November 2026 and January 2027.
Global context
Globally, the United States economy is described as having remained resilient through 2025, supported by strong AI-driven investment, robust household consumption and fiscal stimulus. The Bloomberg median consensus forecasts US growth to stabilise at 2% in 2026, with inflation remaining slightly above the Federal Reserve’s 2% target through mid-year.
In Europe, economic growth is expected to moderate from around 1.4% in 2025 to 1.1% in 2026, while inflation is likely to settle near the European Central Bank’s 2% target as wage pressures ease. Monetary policy is expected to remain broadly neutral.
The UK economy is forecast to remain subdued, with GDP growth expected to slow from 1.4% in 2025 to 1.1% in 2026, reflecting the impact of fiscal consolidation on household incomes. Inflation, however, is projected to fall to 2.5% in 2026, aided by softer energy and food prices.
Japan’s strong expansion in 2025 is expected to ease, with GDP growth slowing to 0.7% in 2026, while the Bank of Japan is anticipated to gradually raise its policy rate toward 1% by the end of the year.
Outlook for 2026
On a global scale, the Bloomberg consensus expects growth to hold steady at 4.1% in 2026, with South Asia remaining the strongest performer, driven by resilient consumption and investment in India. Global inflation is projected to ease to 2.7%, supporting continued — though slower — interest rate cuts in major economies.
China’s post-pandemic recovery is expected to lose momentum, with growth forecast at 4.5% in 2026, as property sector weakness and fading stimulus weigh on investment and consumption.
The report also highlights major global events scheduled for 2026, including the COP31 climate conference in November and several key elections, such as Uganda’s presidential election in January, Peru’s presidential election in April, and the US midterm elections in November.
The authors note that the analysis is based on data from third-party sources and remains subject to revision as economic and political conditions evolve. – IOL
