Economic growth forecast revised for 2026 from 1.6% to 1.2%

The South African government has revised its economic growth forecast for 2026 downward to 1.2% from the previously projected 1.6%. Growth is expected to increase to 2% by 2029. To address the reduced growth, the government has identified R38 billion in targeted savings to be allocated towards social and economic priorities in the medium term.

Higher-than-expected tax revenue, primarily driven by increases in precious metal prices, has contributed to the stronger fiscal performance. The South African Revenue Service (SARS) collected an additional R17 billion in tax revenue. National Treasury attributes this improved financial situation to both savings and higher tax collections.

South Africa's economy has demonstrated resilience despite geopolitical tensions affecting the region. Finance Minister Enoch Godongwana highlighted that the country's economy has remained resilient, and fiscal discipline along with a lower inflation target are helping to keep borrowing costs low. The rand has strengthened and become less volatile, reflecting the government's efforts to maintain macroeconomic stability and fiscal sustainability.

Government debt is projected to stabilize at 78.4% of GDP in 2025/26, slightly below the February budget projection. The deficit is expected to narrow to 4.3% of GDP in 2026, down from the earlier estimate of 4.5%. This marks the first time in nearly two decades that South Africa's debt-to-GDP ratio has stabilized. The primary surplus, which occurs when government revenue exceeds non-interest spending, is also expected to grow, reaching nearly 3% of GDP by 2030.

This will enable the government to reduce borrowing, lower debt-service costs, and allocate more resources towards growth-enhancing investments and essential public services. The stronger-than-expected revenue is largely due to a R17 billion revenue overrun resulting from commodity price booms, particularly for gold and platinum group metals.

Gross tax revenue for 2026/27 is projected at R2.14 trillion, an increase of R17.1 billion compared to the February estimate, driven by higher corporate tax, dividends tax, and VAT collections. Legislation aimed at maintaining fiscal discipline and controlling debt will be published for public comment this week.