Finance

South Africa takes another beating

Staff Writer

 ·13 Oct 2026

After starting the year with a much more positive outlook for South Africa’s economy, the International Monetary Fund says the picture has dimmed significantly since then.

The IMF’s latest World Economic Outlook report for October—the final report for the year—has slashed South Africa’s GDP forecast to just 1.0% for the year.

This reflects significant ups and downs in the outlook as disruptions from the United States’ war in Iran reverberated through the global economy.

Prior to the outbreak of the conflict at the end of February 2026, the IMF had forecast South Africa’s GDP growth at 1.4% for 2026.

In its April outlook, following the war, this was cut down to 1.0%.

The forecast shifted at the time of the July 2026 outlook, where a ceasefire was being negotiated, and a memorandum of understanding had been signed, lifting South Africa’s growth prospects slightly to 1.1%.

However, this has now been undone, with the collapse of peace talks and escalation of attacks and sanctions in the Middle East again driving energy markets into chaos.

As a result, South Africa’s growth forecast has tracked the global sentiment lower, back to its low point of 1.0% for this year.

While the cut from the July outlook is relatively minor, it reflects the entrenched damage caused by the war.

The latest forecast is also below the Bloomberg consensus of economists, which most recently revised its GDP forecast for the year down to 1.1% y/y from 1.2% y/y.

This poses a significant hurdle for the South African government, which has been pushing for 3% growth to address the country’s job crisis, where it sits with an unemployment rate of 33.6%.

South Africa needs to sustain growth above 3% to make any meaningful impact on the number.

According to the IMF, while suffering from the global impact of the war, South Africa’s growth prospects beyond 2026 are relatively flat.

“South Africa’s growth outlook is expected to remain stable in the near term and improve gradually over the medium term,” it said.

This will be underpinned by strengthened policy frameworks and ongoing structural reforms, it added.

To this point, South Africa’s economy was headed in a very positive direction before the Iran War upended global energy markets.

Should conditions normalise, the trajectory can be found once again. But the marks of war are still being felt.

Global growth is projected to decelerate from 3.5% in 2025 to 3.1% in 2026, then recover to 3.4% in 2027. Like with South Africa’s forecast, this is in line with the April update.

The IMF said its modelling assumes the Strait of Hormuz will reopen in March 2027, with a return to prewar conditions by October 2027.

“This assumption implies a gradual restoration of production, shipping, insurance, and payment arrangements rather than immediate normalisation of energy flows,” it said.

It also assumes that severe shortages would generally be avoided through further inventory drawdowns, expanded use of alternative routes, and some additional supply from producers outside the conflict zone.

However, shortages are assumed to arise in some emerging market and developing economies that do not have stocks available and encounter strong competition from wealthier counterparts for available cargoes.

Unfortunately for South Africa, as a net fuel importer, this may mean a tough 12 months ahead in terms of energy prices.

More broadly, the IMF warned that policy and geopolitical uncertainty are assumed to remain elevated through 2027.

South Africa’s economy is expected to grow 1.3% in 2027.