By Colleen Goko
JOHANNESBURG, May 19 – South Africa’s improving economic outlook has been clouded by the Middle East conflict, which is pushing up energy costs and complicating monetary policy, the Institute of International Finance said on Tuesday.
• The IIF cut its 2026 growth forecast to 1.3% from 1.7% previously.
• Inflation is now expected to average 4% this year, up from around 3% expected before the war.
• South Africa increasingly reliant on Gulf Cooperation Council (GCC) for refined petroleum products, leaving it exposed to supply disruptions from the Strait of Hormuz.
• Diesel prices rising faster than petrol due to greater reliance on imports and weaker price regulation.
• Market pricing has shifted to two interest rate hikes this year from two cuts previously.
• The current account deficit is expected to widen to 1.1% of GDP in 2026 from 0.5%.
• Fiscal deficit estimated at 4.5% of GDP for fiscal year 2025/26 which ended in March; IIF projects it narrows to 4.1% in current fiscal year.
• Government debt expected to ease gradually to 77.1% of GDP in the medium-term from a peak of 78.9% of GDP in fiscal year 2025/26.
• On the upside, port and rail reforms could benefit from cargo rerouting around the Cape of Good Hope; elevated commodity prices support mining investment.
(Reporting by Colleen Goko, editing by Karin Strohecker)
