Market Update: PayInc Economic Index shows slight decline in January – Full Analysis

The PayInc Economic Index for January released on Wednesday indicated that the Index was at 103.5 in January, down 0.5% from December, as the economy showed resilience.

Shergeran Naidoo, Head of Stakeholder Engagements at PayInc, said that the PayInc Economic Index moderated to 103.5 in January, down 0.5% from December, but remained 3.4% higher than a year ago.

PayInc said that the results represent a slight shift from December’s strong performance, during which both the nominal value and volume of transactions that cleared through PayInc reached all-time highs.

Elize Kruger, an independent economist, said that for the 2025 year, the index was on average up by 3.1% compared to 1.5% in 2024, signalling economic activity remained resilient despite several challenges. “Given the timeous signals from the index, expectations that the economy grew by 1.3% in 2025, almost tripling the 0.5% in 2024, was well anticipated.”

PayInc said that 2026 is likely to again be characterised by elevated volatility and uncertainty, as geopolitical developments, trade tensions, and political realignments continue to unfold.

“This environment could indicate another year where safe-haven assets outperform, leading to elevated gold and commodity prices in South Africa. Higher commodity prices will support the country’s terms of trade on the assumption that international oil prices return to more subdued levels, while also lifting the rand exchange rate. The IMF projects global growth to hold at 3.3% in 2026, unchanged from 2025, despite trade and tariff uncertainties,” it said.

Kruger added that while the global environment is currently favourable for South Africa, the local economy will experience cyclical support from moderate inflation, real wage increases, and interest rate cuts that will buoy household spending.

“Carpe Diem Research forecasts economic growth in 2026 at 1.6%, supported by progress on structural reform initiatives and a moderate recovery in infrastructure spending. Consumer inflation remains well under control in South Africa with headline inflation forecast at 3.4% in 2026, compared to 3.2% in 2025. Forecasts for lower average oil prices, a stronger rand exchange rate, and imported disinflation should support a moderate inflation outlook,” she said.

Kruger said over the medium term, inflation expectations are expected to gradually anchor lower, paving the way for a sustainably subdued inflation environment in South Africa, supporting stability in the exchange rate and protecting the purchasing power of households. “Given the favourable inflation outlook, there is scope to lower interest rates further, with a maximum of 50bp rate cuts possible in 2026, on the assumption that the South African Reserve Bank gradually moves towards a less restrictive policy stance.”

Kruger added that surging precious metal prices have boosted export earnings and the trade surplus, with key export commodity prices as much as 50% higher than a year ago. “This will have a positive impact on South Africa’s external accounts, leading to a favourable current account balance, in combination with strong capital flows that will support a reasonably stronger rand.

“On the assumption of commodity prices remaining at elevated levels, while sustained USD weakness prevails, the rand exchange rate is forecast to average R16.50/$ in 2026, compared to the R17.89/$ in 2025,” Kruger continued.

The quarterly PayInc Cash Index, which tracks developments in the different aspects of the cash industry, increased by 1.4% in Q3 2025, driven by a recovery in the supply of cash to the industry, among others, bank and non-bank players responsible for facilitating cash availability at different access points.

The Index said that the supply indicator increased by 4.0% compared to Q2 but remained at a 7.2% level below a year earlier. “Measuring notes and coins in circulation in the economy, the cash inventory indicator declined by 0.4% in Q3 and remained 1.7% below a year earlier. Interestingly, the cash demand indicator remained flat between Q3 and Q2 2025 but stayed 1.2% above a year ago.”

Kruger concluded that the South African economy starts the year on a reasonably optimistic footing, with some tailwinds still playing out.

Professor Waldo Krugell, an economist from North West University, said that slightly lower than all-time highs in December is not an issue and the index signals a positive start to 2026.

“I hope the President doubles down on reforms in the SONA this week, and the Minister of Finance affords the average taxpayer a little bit of relief in two weeks’ time. If consumers can do a bit better, it spills over to business confidence, and that is what we need for investment,” he said.

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