Market Update: Budget 2026 | South Africa’s economic growth projected to reach 2% by 2028 – Full Analysis

In a promising turn of events for the South African economy, the National Treasury has forecast a gradual acceleration in growth, projecting an increase of 0.2 percentage points annually, culminating in reaching the target of 2% by the year 2028.

This optimism comes on the heels of a GDP rebound that saw the economy expand by approximately 2.1% in 2022, largely attributed to the recovery from the effects of the Covid-19 pandemic, according to Business Report.

Achieving growth rates akin to those of 2022 could provide significant relief to South Africa’s notoriously high unemployment rate, which currently hovers above 31%.

Finance Minister Enoch Godongwana underscored at a recent National Budget Review presentation that the outlook for domestic growth is on the rise, bolstered by a stabilising global economy amidst a backdrop of ongoing geopolitical tensions that have been reshaping trade policies and supply chains worldwide.

“We project real economic growth of 1.6% in 2026, an improvement from the 1.4% estimated in 2025,” Godongwana declared.

He attributed this optimistic trajectory to the strengthening of economic performance from the latter half of 2025, adding that over the medium term, average growth is anticipated to settle around 1.8% before reaching the 2% mark by 2028, Business Report reported.

Deputy Minister of Finance, David Masondo, echoed this sentiment during a pre-Speech media briefing, emphasising the connection between improved investor confidence, reduced interest rates, and a decline in risk premiums with the structural reforms the government has committed to over the past five to six years.

“These reformative actions have significantly contributed to stabilising critical areas such as electricity supply, freight, rail, and easing visa applications to boost tourism and attract skilled labour,” he explained.

The government is poised to invest significantly in infrastructure, with public sector spending expected to exceed R1 trillion over the next three years. However, while global economic resilience remains a hopeful sign, risks surrounding trade persist. According to Masondo, the focus now must shift towards reinforcing domestic growth drivers through accelerated structural reforms.

Globally, growth predictions indicate a stabilisation rate of 3.3% by 2026, mirroring estimates from 2025. Though advanced economies are projected to grow at a subdued pace, emerging markets, notably in Sub-Saharan Africa and India, are poised for brisker growth driven by robust domestic demand. Meanwhile, as China transitions from an investment-led to a more consumption-driven economic model, shifts in global trade dynamics are anticipated to follow suit.

However, despite these hopeful projections, Godongwana cautioned that enduring challenges such as persistent logistics bottlenecks, inadequate public infrastructure, and outbreaks like Foot-and-Mouth Disease continue to pose significant risks to domestic economic activity. He reiterated that addressing structural constraints—such as high unemployment rates and transport issues—remains crucial for achieving sustained growth.

“For the economy to thrive, faster implementation of reforms, especially in energy, water, and transport, is imperative,” Godongwana stated, further asserting that a balanced fiscal approach and enhanced public state capacity are fundamental to driving rapid, inclusive growth.

As South Africa aims to navigate the complexities of its recovery, officials remain adamant that the path forward lies in maintaining macroeconomic stability, engaging in structural reforms, and investing in infrastructure that facilitates growth and attracts private investment.

IOL Business