GDP is projected to increase by 1.2% in 2026 and 1.6% in 2027. Ongoing structural reforms support infrastructure investment, notably in energy, water and transport. The appreciation of the rand and the decrease in bond yields over the past year will support activity, although the impact will be lowered due to the slight reversal of these factors since the onset of the evolving conflict in the Middle East. Lower global demand will limit exports. Higher oil prices will push up inflation in 2026, but it will moderate in 2027, although remaining elevated due to higher food prices.

Fiscal consolidation, driven by declining expenditure as a share of GDP, will help contain increases in public debt. Monetary policy is projected to remain unchanged over 2026, before easing to a neutral stance over 2027. Efforts to raise spending efficiency are key to fiscal consolidation. Continued progress in strengthening the governance of state-owned enterprises, particularly in the electricity sector, would support growth and energy security. Creating a business-friendly regulatory environment would lower obstacles for firms and support job creation. 

South Africa has significant scope to boost economic performance, after a decline in GDP per capita over the past decade. Educational outcomes are low, and labour productivity is limited. The large gaps in employment rates vis-à-vis the OECD average have further widened since the pandemic. Investment as a share of GDP has fallen from around 29% over the 2000s to 9.5% in recent years, leading to supply bottlenecks and limited potential growth.

Easing regulatory barriers for businesses, ensuring a level-playing field and boosting the efficiency of state-owned enterprises would support job creation, investment and productivity, improve resource allocation and reduce risks to fiscal consolidation. Improving access to, and the quality of, education and training would help reduce skills shortages and boost labour productivity. Ensuring the swift implementation of electricity and climate policies would support energy security and climate goals while reducing air pollution.