SA Economy Set for a Modest Lift: OECD Forecasts 1.2% growth in 2026, 1.6% in 2027
Published: 14/07/2026
The OECD has released an outlook of South Africa’s economy for 2026 and forecast of 2027. Several key indicators show a steady increase. During the first quarter of 2026 geopolitical challenges, US tariffs measures and disease outbreak impacted the economy and added uncertainty to the agricultural sector. Despite this, South Africa’s export basket demonstrated relative resilience. According to the OECD’s latest Economic Outlook, South Africa's economy is on track for a steady increase. GDP growth is projected at 1.2% in 2026 and forecasted for 1.6% in 2027. This slow improvement will depend on continued structural reforms, particularly in energy, water and transport infrastructure, alongside a modest recovery in investment and exports. That being said the agricultural industry grew by 3.9% of total GDP during Q1 of 2026 according to trading economics, while trade expanded by 0.7%.
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The OECD has released an outlook of South Africa’s economy for 2026 and forecast of 2027. Several key indicators show a steady increase. During the first quarter of 2026 geopolitical challenges, US tariffs measures and disease outbreak impacted the economy and added uncertainty to the agricultural sector. Despite this, South Africa’s export basket demonstrated relative resilience. According to the OECD’s latest Economic Outlook, South Africa's economy is on track for a steady increase. GDP growth is projected at 1.2% in 2026 and forecasted for 1.6% in 2027. This slow improvement will depend on continued structural reforms, particularly in energy, water and transport infrastructure, alongside a modest recovery in investment and exports. That being said the agricultural industry grew by 3.9% of total GDP during Q1 of 2026 according to trading economics, while trade expanded by 0.7%.
What's driving the recovery:
A stronger rand and lower bond yields over the past year have supported growth activity, though both have somewhat reversed since the escalation of conflict in the Middle East, entering the second quarter of 2026 slightly affecting the improvement. Business and consumer confidence strengthened in the first quarter of 2026, extending gains from the second half of 2025. Consumer confidence sits at -19 still below its long-term average of -2.51 according to BER.
Investment is expected to strengthen gradually as interest rates ease and reform drive continues. Rail and port capacity improvements should support exports over the medium term, even as softer global demand and US tariffs on South African goods continue to weigh on trade.
The agricultural industry is commended for its performance during global volatility and the main sectors, with horticulture contributing the most.
Inflation up in the near term, then easing
The ongoing conflict in the Middle East has continued to push global oil prices higher, contributing to increased inflation in 2026, with headline inflation already up to 4.0% in April. The OECD expects inflation to peak at 4.2% in 2026 before easing to 3.7% in 2027, while food price pressures are expected to keep inflation above pre-shock levels.. The South African Reserve Bank is expected to hold its policy rate at 6.75% in the near term, looking through the initial inflation impact of the energy shock, before easing to around 6% in the second half of 2027.
Labour market and fiscal position
Labour market conditions kept improving through 2025, with unemployment declining to 31.9% in the fourth quarter. The OECD expects only a slight further improvement, to 31.7% by 2027, as employment gains are largely offset by weaker purchasing power. On the economic side, consolidation continues: the primary balance is projected to strengthen to 1.7% of GDP in 2026 and 2.1% in 2027, driven mainly by spending restraint, helping to slow the rise in public debt.
Looking ahead
High fuel prices could keep inflation high, forcing higher interest rates, and shortages of fuel or fertiliser could reduce production. Both risks could slow economic growth. As the tension in the middle east remain uncertain, keeping an eye on fuel prices will be relatively important.
