South Africa's economic outlook worsens, but wage growth expectations rise
A new survey shows expectations of a wage increase Salaries are now expected to increase by 4.9% this year and 5.1% in 2026, up from 4.5% and 4.8% respectively in a first quarter survey, according to the BER.
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South Africans are now more pessimistic about economic growth, with financial analysts, business executives, trade union representatives, and households seeing gross domestic product materially lower than three months ago.
However, respondents see higher wages even though they anticipate a slow down in inflation. Salaries are now expected to increase by 4.9% this year and 5.1% in 2026, up from 4.5% and 4.8% respectively in the previous survey, according to the BER.
This is according to the Bureau of Economic Research’s (BER) second quarter survey, which polled these three groups on behalf of the South African Reserve Bank. Respondents now expect the economy to grow by a mere 0.9% this year, compared to 1.2% previously.
For 2026, those polled anticipate gross domestic product (GDP) growth of 1.2%, down from the 1.4% forecast in the first quarter. South Africa’s GDP gained 0.1% in the first quarter of the year, which beat economists’ expectation of a decline.
The BER survey also reflects a broad-based and significant decline in inflation expectations across all social groups surveyed. Businesspeople, trade union representatives and financial analysts all revised their expectations downward across the forecast horizon.
On average, headline consumer inflation is expected to be higher than the current 2.8% by 1.1 percentage points, while the cost of living is expected to grow at a slower rate than previously anticipated for 2026 and 2027, the survey indicated. This is the first time in more than four years that expectations for the current year have fallen below 4%, BER said.
Five-year-ahead inflation expectations were also revised downward by all social groups, and it is now at 4.4%, a decrease of 0.3 percentage points from the previous quarter.
Households’ expectations for inflation over the next 12 months dropped to 5.4%, from 5.7% previously. This is the lowest rate recorded since the fourth quarter of 2021. Their five-year outlook also declined, from 9.1% to 8.5%.
IOL