South Africa’s GDP shrank in Q2 2026

South Africa's GDP contracted by 0.2% in the second quarter of 2026, marking the end of an 18-month period of growth. The economic slowdown was caused by the end of the Iran war which had fueled growth earlier, weakened demand and higher fuel prices following a blockade in the Strait of Hormuz. The impact affected the mining, trade, and manufacturing sectors.

This contraction signals an end to the steady economic recovery following the formation of the coalition government two years ago. Goldman Sachs has revised down its 2026 growth forecast to 1.2% from the previous 1.6%. South Africa's central bank had raised its main interest rate in May to counteract the inflationary impact of the war, and is expected to hold its latest rate-setting meeting this month.

However, Capital Economics believes this tightening cycle is "most definitely over." The economic slowdown, coupled with unemployment hitting a four-year high, has led to a resurgence of anti-migrant rhetoric and vigilante violence targeting Africans, accusing them of taking jobs and overloading public services. This discontent is occurring ahead of municipal elections in November.