Finance Minister Enoch Godongwana on Wednesday set out a fiscal framework that projects a gradual improvement in economic growth alongside continued efforts to narrow the deficit and stabilise public debt.
In its budget review, the national treasury forecast the economy to grow by 1.6% in 2026, up from an estimated 1.4% in 2025. Over the next three years, growth is projected to average 1.8% and reach 2% by 2028. The forecast signals a steady recovery in output but at a moderate pace.
At these levels, economic activity expands, yet the improvement is unlikely to deliver a rapid reduction in unemployment or a significant rise in living standards in the short term.
The growth outlook is supported by improvements in electricity supply and ongoing structural reforms aimed at easing constraints in energy and logistics. However, weaknesses remain.
Rail inefficiencies, port congestion and municipal service backlogs continue to weigh on business activity. These structural bottlenecks limit the economy’s ability to grow faster even when external conditions are supportive.
Global growth is projected at 3.3% in 2026. Emerging markets are expected to anchor global expansion, while advanced economies grow more moderately. South Africa’s outlook remains closely tied to global trade conditions and commodity demand but domestic constraints remain the primary drag on stronger performance.
The fiscal framework reflects continued consolidation. The consolidated budget deficit, which measures the gap between government spending and revenue, narrows to 4.5% of gross domestic product in 2025 to 2026. It is projected to decline further to 4% in 2026 to 2027 and to 3.1% in 2027 to 2028.
Gross debt is projected to stabilise at 78.9% of GDP in 2025 to 2026 before declining to 77.3% in 2026 to 2027 and to 76.5% by 2028 to 2029. After years in which the debt ratio rose steadily, this marks a turning point.
“For the first time in 17 years, debt will stabilise and it will continue to fall in the coming years. The budget deficit has narrowed significantly and debt-service costs are also falling,” Godongwana said in his budget speech to parliament.
“The world has taken notice: South Africa has been removed from the FATF (Financial Action Task Force) grey list; We secured our first credit rating upgrade in 16 years; and borrowing costs have eased, creating space for growth and development. These are signals of restored credibility. Of renewed resilience. And of a nation regaining its footing.”
The debt level remains elevated but the projected decline suggests that the pace of accumulation has slowed. The stabilisation reflects both restrained spending growth and sustained revenue collection.
The main budget primary surplus plays a central role in this adjustment. The primary surplus measures whether revenue exceeds non-interest spending. It reaches 0.9% of GDP in 2025 to 2026 and is projected to expand to 1.6% in 2026 to 2027, rising further to 2.3% by 2028 to 2029.
The treasury indicated that it intends to introduce a principles based fiscal anchor in the medium term budget policy statement later this year. The aim is to strengthen the long term credibility of fiscal policy by setting clearer guidelines for borrowing and debt management.
Over the next three years, growth is projected to average 1.8% and reach 2% by 2028
