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South Africa's heavy reliance on domestic spending to drive economic growth is expected to weaken in 2026, as global uncertainty linked to Middle East tensions puts pressure on fuel prices, inflation and consumer sentiment.
Self-confidence.
According to independent economist John Luce, the country's recent growth performance has been largely driven by consumers, but this momentum is unlikely to be sustained.
“South Africa's reliance on its consumers to drive economic growth makes growth to 2026 difficult,” Loos said. He said the conditions supporting domestic spending are unlikely to repeat in 2025.
consumer driven 2025 recovery
Loos said South Africa's economy is expected to grow 1.1% in 2025, up from 0.5% in 2024, but stressed the improvement was largely due to domestic consumption rather than broader growth.
He cited consumer spending as the “key driver” of activity, with real household consumption expenditure expected to grow 3.6% in 2025, its strongest performance since the post-pandemic rebound in 2021.
“The consumer was king in 2025,” Loos said, pointing to strong disposable income growth, low inflation and interest rate cuts as key supporting factors.
He highlighted that inflation relief, better investment income and lower debt-service costs helped boost household spending power last year.
Global headwinds and oil prices
However, Luz warned that external risks are now increasing. Ongoing instability in the Middle East, particularly around the Strait of Hormuz, has kept global oil prices high, with Brent crude near $95 a barrel.
“This level is still about 55% above the 2025 year-end price,” he said, adding that inflation is likely to remain under pressure globally due to uncertainty in energy markets.
He said even a temporary ceasefire has failed to restore confidence in global shipping routes, and supply disruptions could continue even if geopolitical tensions ease.
Slow global growth expected
The slowdown in the global economy is also impacting the outlook. The International Monetary Fund has already cut its 2026 global growth forecast to 3.1% from earlier projections.
Loos pointed to weak global indicators, including a decline in the JPMorgan global PMI, as evidence of slowing growth in both manufacturing and services.
“The global economic slowdown is likely to have the same effect for an open economy like South Africa,” he said, warning that weak external demand could further deteriorate export performance.
South Africa's vision for 2026
Domestically, Luz expects government spending to remain limited as fiscal pressures continue, while investment growth remains uneven despite earlier interest rate cuts.
Although fixed investment may be recovering with some lag, recent data still shows weakness in construction activity, suggesting limited growth in the near term.
Ultimately, Loos cautioned that consumers, South Africa's most important growth engine, are unlikely to maintain last year's momentum.
“In short, none of the main drivers of household disposable income growth are likely to be that strong in 2026,” he said.
They concluded that South Africa's GDP growth is likely to slow considerably, with expansion projected in the range of 0.5% to 1% for 2026, as the economy awaits greater global stability.