A Fragile Foundation: Why Economists Are Cautiously Hopeful for SA in 2026

After years of sluggish growth and relentless headwinds, South Africa’s economy is entering 2026 on a noticeably firmer, if still fragile, footing. Leading economists are expressing a tempered but tangible sense of cautious optimism, pointing to a confluence of improving fundamentals that could signal a turning point in the country’s beleaguered business cycle.

Professor Raymond Parsons of the North West University Business School encapsulates the mood, noting the economy ended 2025 in a “notably stronger position” than a year before. “Based on the latest data available, the economy enters 2026 on a ‘note of cautious optimism’ about the outlook for next year,” he stated.

The Pillars of a Tentative Recovery

This newfound, if careful, hope rests on several supporting pillars:

• Stronger-Than-Expected Growth: GDP growth for 2025 is now expected to come in closer to 1.4%, surprising many analysts who had forecast below 1%. This marks a fourth consecutive quarter of expansion, albeit from a low base.

• Easing Inflation and Interest Rates: Inflation is projected to trend towards the South African Reserve Bank’s 4.5% target, creating room for further interest rate cuts that will ease pressure on consumers and businesses.

• Structural Reforms Bearing Fruit: The gradual easing of energy and logistical constraints, while incomplete, is providing tangible relief and reducing a major drag on output.

• Improved Political Sentiment: The stability of the Government of National Unity (GNU), despite its internal tensions, is seen as a net positive, providing a more predictable policy environment. This, coupled with the country’s exit from the FATF grey list and recent positive credit rating actions, has renewed a degree of investor confidence.

Global Winds and Domestic Caution

Independent economist Ulrich Joubert echoes the balanced view, highlighting the importance of a supportive international environment and lower global rates. However, the optimism is deliberately guarded.

Johann Els, Chief Economist at Old Mutual, warns that South Africa remains heavily tied to global conditions, particularly the United States economy and interest rate trajectory. He forecasts a slight uptick in local growth to 1.7% for 2026, with a path toward 2%+ growth by 2027a positive direction, but one that underscores the long climb ahead.

The consensus is clear: South Africa has managed to patch some of the most glaring holes in its economic hull. The ship is no longer taking on water as rapidly, and the winds have become slightly more favourable. But no one is declaring the voyage smooth. The cautious tone acknowledges that the foundations, while firmer, are not yet solid, and the journey toward robust, inclusive growth remains long and susceptible to both domestic missteps and global squalls. For now, however, after a prolonged drought of good news, a note of cautious optimism is a welcome change in tune.

{Source: IOL}

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