Citadel expects South Africa’s economic growth to come in below 1% this year, while Anchor Capital forecasts growth of 1.1% in 2026 and 1.4% in 2027.
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South Africa’s stronger-than-expected economic growth at the start of the year may already be facing a significant headwind, with new data suggesting that higher fuel costs are beginning to filter through the economy.
According to Independent economist Elize Kruger, who compiles the PayInc Economic Index, petrol and diesel prices had risen cumulatively by about R8 a litre and R10 a litre respectively by early June.
Kruger cited Bureau for Economic Research estimates showing that the higher fuel prices could add approximately R45 billion in costs to the economy during the second quarter.
“The likelihood that businesses can fully absorb these increases is low, raising the prospect of broader inflationary pressures across the economy,” she said.
The PayInc Economic Index, which tracks the value of electronic transactions cleared through PayInc, as well as wholesale cash demand, fell 2.1% in May to 102.6, its lowest level since November 2025.
“Households and businesses have faced mounting pressure due to consecutive fuel price increases and a 25-basis-point interest rate hike announced in late May,” said Kruger. “Combined with declining consumer and business confidence, these factors are expected to weigh on economic activity in the months ahead.”
The data comes just days after Statistics South Africa reported that gross domestic product (GDP) expanded by 0.5% in the three months to March, beating expectations and recording growth across nine of the economy’s 10 sectors.
However, economists caution that the first-quarter figures largely reflect economic conditions before the escalation of the Middle East conflict and the resulting spike in oil prices.
“While South Africa’s stronger-than-expected GDP outcome is encouraging, it largely reflects economic conditions before the escalation of the Middle East conflict,” said Lerato Ntuli, economist at Anchor Capital.
Ntuli said the GDP figure “therefore does not yet capture the full impact of subsequent energy market disruptions”.
According to Ntuli, the conflict has placed sustained upward pressure on global oil prices, contributing to significantly higher domestic fuel costs during the second quarter and helping push inflation to 4%.
The South African Reserve Bank recently raised the interest rate by 0.25 percentage points, taking the prime rate to 10.5%.
Looking ahead, Ntuli said the combination of elevated fuel costs and higher interest rates was likely to weigh on household spending and business activity.
“The outlook is further complicated by the possibility of a prolonged Middle East conflict, which could keep global oil prices elevated and place additional pressure on inflation.”
Maarten Ackerman, chief economist at Citadel, said the stronger GDP data released last week should be viewed in context.
“However, it is important to recognise that this is largely a pre-geopolitical conflict number, supported by the continuation of favourable tailwinds from 2025, including strong commodity prices and another solid contribution from agriculture,” he adds.
Ackerman said there were already “signs of fragility” in the outlook.
“The outlook for the remainder of 2026 is expected to be more challenging. Since the end of the first quarter, rising geopolitical tensions in the Middle East have pushed energy costs higher, inflationary pressures have intensified and tighter monetary policy is likely to keep interest rates elevated for longer. This places further pressure on consumers and businesses,” said Ackerman.
Ackerman added that agriculture, one of the key contributors to recent growth, could also come under pressure from disease outbreaks, adverse weather conditions, flood-related infrastructure damage and higher fuel and fertiliser costs.
“While the first quarter data gives us a better starting point, the growth outlook has become more difficult; the combination of higher energy costs, sticky inflation, elevated interest rates and pressure on agriculture means that economic momentum is likely to slow as the year progresses,” Ackerman explained.
Citadel expects South Africa’s economic growth to come in below 1% this year, while Anchor Capital forecasts growth of 1.1% in 2026 and 1.4% in 2027.
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