South Africa’s Economy Expected to Grow Modestly in 2026, Economists Forecast
South Africa’s economy is expected to show modest improvement in 2026, according to the latest BMR/Unisa Economist of the Year forecasts released by the Bureau of Market Research (BMR). The February 2026 consensus forecasts suggest that while economic conditions are gradually stabilising, structural constraints continue to limit stronger long-term growth prospects. Economists forecast real GDP growth of 1.6% for 2026 that shows an improvement on recent years, but still below the level needed to significantly reduce unemployment.
Inflation Expected to Remain Contained
One of the more encouraging aspects of the outlook is inflation. Consumer inflation (CPI) is projected to average 3.4% in 2026, comfortably within the South African Reserve Bank’s new target range of 2% to 4%.
This relatively subdued inflation environment could create room for limited interest rate easing during the year. Economists expect the prime lending rate to ease slightly to around 9.8% by the fourth quarter of 2026. Lower inflation, combined with previous rate cuts, is expected to provide some relief to consumers and support a gradual recovery in household spending.
Consumer Spending and Employment Showing Signs of Recovery
Real household consumption expenditure is forecast to grow by 2.1% in 2026, slightly ahead of overall economic growth. Economists believe subdued inflation, moderate wage growth and further modest repo rate reductions may help improve disposable income and support credit-driven spending.
Employment growth is expected to remain modest at 1.0% year-on-year by the fourth quarter of 2026, indicating gradual labour market improvement. However, persistently high unemployment remains one of South Africa’s biggest structural challenges.
Structural Challenges Continue to Weigh on Growth
Despite signs of cyclical improvement, economists caution that structural weaknesses continue to constrain the economy. Among the major concerns identified are:
- Infrastructure maintenance backlogs
- Water and logistics bottlenecks
- Governance weaknesses
- Uneven policy implementation Limited productivity growth
Economists noted that progress in energy reform, Operation Vulindlela and increased private sector participation are positive developments but emphasised that sustained reform will be essential to unlock stronger economic growth.
Global Conditions Offer Both Support and Risk
Globally, economic growth is projected at 3.1%, providing a moderately supportive external environment. A softer US dollar is expected to help stabilise the rand, which is forecast to trade around R16.50 to the US dollar in the fourth quarter of 2026.
Oil prices are forecast to remain relatively moderate at around US$64 per barrel, although geopolitical tensions, particularly the escalating Middle East conflict, remain a significant risk factor for global markets and energy prices. Economists also highlighted that elevated precious metal prices could provide some support to South Africa’s mining sector and government revenue, although dependence on commodity cycles still presents risks.
Mixed Views Among Economists
While there is broad agreement on the overall direction of the economy, economists differ on the likely strength of the recovery. Some believe lower inflation and declining interest rates could lead to stronger household spending and improved investment confidence. Others remain cautious due to ongoing political uncertainty, tight credit conditions, and concerns around governance and policy implementation. External risks highlighted include:
- Global trade protectionism
- US monetary policy uncertainty
- Geopolitical tensions Commodity market volatility
BMR Leadership Weighs In
Professor Carel van Aardt, COO of the BMR, said the forecasts point to some cyclical improvement, but warned that structural reforms remain critical. “Without sustained improvements in productivity, competitiveness and service delivery, cyclical support is unlikely to translate into stronger long-term expansion.” BMR CEO Professor Deon Tustin added that although inflation is moderating, financing conditions remain relatively tight. “Inflation at 3.4% provides some relief to households, and there may be scope for limited rate adjustments. However, financing conditions remain relatively tight.”
About the BMR/Unisa Economist of the Year Competition
The BMR/Unisa Economist of the Year Competition brings together leading economists to provide independent forecasts on key economic indicators. A total of 44 economists participate in the 2026 competition. The initiative aims to promote informed public discussion and support evidence-based decision-making across business, government and civil society.
