Weaker Growth Outlook Puts Pressure on Upcoming MTBPS

The International Monetary Fund’s (IMF) October 2026 World Economic Outlook revised its growth outlook for South Africa downwards, highlighting the continued challenges facing the country’s economic recovery. While structural reforms may strengthen the foundations for economic expansion, their longer-term impact will depend on effective implementation and whether improvements translate into sustained growth, investment and employment. This is according to Thys van Zyl, CEO of Everest Advisory Services, ahead of the Minister of Finance’s MTBPS next week. “There is reason for cautious optimism about certain developments in the economy, but we must distinguish between signs of recovery and the kind of sustained economic growth needed to reduce unemployment, encourage investment and improve the financial position of households. The challenge is that South Africa’s economy is not growing fast enough to meaningfully ease the pressure on government, businesses and consumers.”

The IMF’s latest outlook highlights the difficult economic environment South Africa continues to face. Global uncertainty, higher energy costs and domestic structural constraints continue to weigh on economic activity. Van Zyl says that while progress in areas such as electricity supply, logistics and greater private-sector participation is encouraging, the full economic benefits of these reforms are likely to become evident only over time.

“Economic reform is not a quick fix. Improvements in electricity supply and logistics create a stronger foundation for growth, but they must be accompanied by greater policy certainty, effective implementation and an environment in

which businesses can invest with confidence. The real test is whether these improvements ultimately lead to new employment opportunities, stronger economic activity and better living conditions for South Africans.”

Against this backdrop, Van Zyl expects the upcoming MTBPS to provide an important indication of the government’s ability to maintain fiscal discipline while economic growth remains under pressure. He believes that further clarity on a potential fiscal anchor will be particularly important in demonstrating how government intends to manage public finances over the longer term. As reported by Business Day, Moody’s will also be looking for further details on this aspect.

Van Zyl notes that Moody’s previously revised South Africa’s credit rating outlook from stable to positive, citing factors including improving fiscal performance and the continuation of structural reforms.

Van Zyl believes the MTBPS presents an opportunity to further strengthen this cautious confidence. “International credit ratings agencies and investors look not only at the government’s intentions, but particularly at the credibility and sustainability of its fiscal plans. A clear and credible framework for managing public debt and expenditure could help strengthen confidence, reduce uncertainty and, over time, lower the government’s borrowing costs. However, the government must demonstrate that fiscal discipline and economic growth can go hand in hand. Simply stabilising public finances is not enough if the economy does not grow more strongly at the same time.”

According to Van Zyl, policy continuity is also critically important. “Moody’s recent comments, as reported by News24, on the potential continuation of the Government of National Unity (GNU) following the upcoming local government elections highlight the importance international investors attach to political stability and the continuation of reforms. Political stability is important, but ultimately, confidence is earned through policy and its implementation. Investors want assurance that essential reforms will continue, regardless of political changes.”

While policymakers and investors focus on the country’s economic outlook, ordinary South Africans are already feeling the effects of a challenging economic environment. “In September, the South African Reserve Bank raised the policy rate by 25 basis points to 7.25% in response to increasing inflation risks. In addition, sharp fuel price increases in October have placed further pressure on households and businesses. For households already struggling to meet their monthly financial obligations, higher interest rates and fuel prices are a particularly difficult combination. Higher interest rates increase the cost of debt, while more expensive fuel affects not only motorists but also drives up transport and distribution costs.

These pressures could ultimately filter through to the prices of other goods and services.”

Van Zyl warns that sustained pressure on consumer spending could also hamper the broader economic recovery. “Household consumption is an important driver of economic activity. When people are forced to spend less, it affects business revenues, their ability to expand and, potentially affecting, job creation.”

Van Zyl believes South Africa is at an important turning point. The early results of reforms offer hope, but the country cannot afford to lose momentum. “The positive signs we are seeing in certain parts of the economy must be
acknowledged. They demonstrate that change is possible and that reforms can indeed make a difference. However, we cannot be satisfied with limited growth simply because the economy is performing better than during previous crises. South Africa needs an economy that grows fast enough to create new opportunities and improve the standard of living of its people.”