Mastercard Economics Institute’s 2026 Economic Outlook: South Africa poised for recovery as purchasing power improves

• South Africa’s Gross Domestic Product (GDP) is projected to rise by 1.2% in 2026, supported by stronger consumer purchasing power based on current available data and modelling assumptions.
• If current trends persist, wage growth continues to outpace inflation, boosting purchasing power
• Trade diversification opens new export opportunities
• AI adoption and fiscal investment to sustain long-term growth
• SMEs are increasing their digital presence

Johannesburg, South Africa; 26th January 2026: The Mastercard Economics Institute (MEI) released ‘Economic Outlook 2026’, its annual report identifying themes that will shape next year’s economic landscape. 

The report examines how global policy changes which grabbed headlines in 2025 will continue to influence economies around the world throughout 2026. While the global economy becomes more fragmented, growing AI adoption presents new opportunities. 

South Africa’s economy is expected to expand by 1.2% in 2026. This compares with projected GDP growth of 4.4% across Sub-Saharan Africa and global growth of 3.1%. The country’s growth momentum is expected to strengthen, supported by resilient consumer demand and infrastructure investment. 

Inflation pressures across the Africa are forecast to moderate, aided by a weaker US dollar and lower energy prices, allowing room for central banks to reduce interest rates. In South Africa, consumer purchasing power is likely to improve as wage growth continues to outpace inflation, encouraging discretionary spending.

“As we look to 2026, South Africa’s economic outlook shows encouraging signs as supportive financial conditions and improving household incomes boost consumption. Disinflation, investments in strategic sectors and a flourishing digital economy are expected to underpin growth, even as global trade pressures and structural constraints continue to pose risks,” said Khatija Haque, chief economist, EEMEA, Mastercard Economics Institute.

“Macro indicators point to early signs of improvement in purchasing power, as inflation slows and wage growth outpaces price increases. As digital innovation accelerates and investment strengthens key sectors of the economy, we see potential for more resilient and inclusive growth in 2026,” said Gabriel Swanepoel, country manager, Southern Africa at Mastercard.

Key findings from the report include:

Consumer spending drives recovery

Lower interest rates and improving real incomes are expected to support renewed consumer activity. Mastercard data shows that South African households are increasingly prioritising lifestyle and experience-led spending as budget pressures ease.

Diversifying trade with emerging markets

South Africa is increasing trade with emerging markets, as supply chains evolve and new trade corridors deepen ties with Asia and the Middle East. Chinese Mainland’s removal of import duties on most African goods provides new opportunities for exporters, particularly in sectors exposed to US tariff measures.

Digital transformation and fiscal expansion among main tailwinds

The MEI identifies digital transformation, particularly deeper AI integration, as a key macro trend likely to boost productivity and economic growth. The MEI AI Enthusiasm Index ranks countries according to their spending on AI service providers, AI’s share of total software spending and per-capita spend on AI tools. The index places South Africa at early-stage adoption, with scope for further growth as AI usage expands across the economy.

The MEI also highlights long-term infrastructure development and strategic investment as key tailwinds that can strengthen domestic capabilities and help firms adapt to shifting global dynamics. 

SMEs remain vital to the continent’s economy

In South Africa, SMEs account for 21% of retail spending and the share of ecommerce spending at SMEs has grown year-on-year. Digital tools are enabling small businesses to streamline operations, reduce costs and compete more effectively.

MEI sees an opportunity for SMEs to continue to gain share in tech-driven services. There is a growing demand for local tech solutions and a more specialised offering. To succeed, SMEs require strategic agility and digital readiness.  Those that are the most flexible and tech forward are likely to be best positioned to accelerate growth.

Consumers worldwide will remain savvy, focusing on international, tech-enabled and value-conscious spending. They will continue to prioritise meaningful moments, such as travel and live events, while remaining price-sensitive for many necessary goods.

The ‘Economic Outlook 2026’ report draws on a multitude of public and proprietary data sets, including aggregated and anonymised Mastercard sales activity, as well as models that are intended to estimate economic activity. The analysis reflects MEI’s independent economic modelling and should not be interpreted as forecasts or guidance on Mastercard’s operational or financial performance.