South Africa’s slow economic recovery is set to continue through 2026, but remains vulnerable to global shocks, policy uncertainty and long-standing structural constraints.
This is according to the International Monetary Fund’s latest World Economic Outlook (WEO) update released on Monday.
The IMF projects South Africa’s economy to grow by 1.4% in 2026, a slight upward revision from earlier forecasts of 1.2%, rising marginally to 1.5% in 2027.
The forecast is still well below both the sub-Saharan African average and the pace needed to make meaningful inroads into unemployment, poverty and inequality.
The outlook places South Africa at the weaker end of emerging market performance, even as the IMF sees global growth holding steady at 3.3% in 2026 amid what it describes as “divergent forces”.
These divergent forces see fading trade tensions and easing inflation on the one hand, and rising geopolitical, fiscal and financial risks on the other.
However, those global dynamics arrive at a delicate moment for South Africa.
While sub-Saharan Africa as a whole is expected to accelerate to 4.6% growth in 2026 and 2027, supported by macroeconomic stabilisation and reform efforts in several large economies, South Africa continues to lag the regional recovery, reflecting domestic bottlenecks that blunt the benefits of a more stable global environment.
Globally, the IMF said inflation is projected to ease further, falling to 3.8% in 2026, while financial conditions remain broadly accommodative.
These trends should at least provide some breathing room for emerging markets such as South Africa through lower imported inflation and potentially softer global interest rates.
Energy prices are also expected to decline further in 2026, which could ease pressure on South Africa’s current account and reduce fuel-driven inflation, a key risk for food and transport costs.
However, the IMF warned that any benefit could be offset by renewed geopolitical shocks or disruptions to global supply chains that would quickly reverse price declines
Moreover, the report noted that much of global growth resilience is being driven by a narrow set of sectors, particularly technology and artificial intelligence-related investment, concentrated largely in advanced economies and parts of Asia.
South Africa, with limited exposure to these fast-growing sectors, risks being left on the margins of the current global upswing.
The IMF’s forecast implicitly underscored how South Africa’s growth ceiling remains constrained by domestic factors rather than global demand alone.
Persistent electricity supply challenges, weak logistics performance, infrastructure backlogs and policy uncertainty continue to weigh on private investment and productivity.
Even as global trade remains relatively robust, supported by technology-related exports elsewhere, South Africa’s export competitiveness is constrained by port inefficiencies and transport disruptions that limit its ability to take advantage of improved external conditions.
The WEO update also highlighted rising global public debt and fiscal vulnerabilities as a key downside risk. This is particularly relevant for South Africa, where limited fiscal space narrows the government’s ability to respond to shocks or support growth without undermining debt sustainability.
The IMF stressed that rebuilding fiscal buffers and committing to credible medium-term consolidation are essential, especially for countries facing high borrowing costs and subdued growth
The IMF warned that risks to the global outlook remain skewed to the downside, with potential triggers including renewed trade tensions, disappointment over AI-driven productivity gains, or an escalation in geopolitical conflicts.
For South Africa, such shocks could translate into tighter global financial conditions, weaker capital flows and renewed currency volatility — dynamics that historically amplify domestic vulnerabilities.
At the same time, the Fund cautioned that policy uncertainty, both globally and domestically, continues to deter long-term investment.
Reducing uncertainty through clearer policy frameworks, credible reform implementation and institutional stability is identified as a key lever for lifting medium-term growth prospects.
While the IMF’s baseline forecast offered little in the way of rapid acceleration for South Africa, it also pointed to a potential window of opportunity. It said the easing of inflation, stabilising trade conditions and supportive global financial backdrop could give policymakers space to push ahead with long-delayed structural reforms.
The report emphasised that sustained growth will depend on reforms that improve labour market efficiency, strengthen education and skills, streamline regulation and promote competition — areas that remain central to South Africa’s economic debate
Without decisive progress on these fronts, South Africa risks remaining stuck in a low-growth equilibrium, even as parts of the global economy adapt and rebound.
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