IIF Cuts South Africa Growth Forecast as Middle East Conflict Drives Energy Risks

Mintesinot Nigussie

The Institute of International Finance has lowered its 2026 growth forecast for South Africa to 1.3 percent from 1.7 percent. The revision is driven by the escalating Middle East conflict raising energy costs and complicating monetary policy.

Inflation is now expected to average 4 percent this year, up from earlier projections. Financial markets have shifted from expecting two interest rate cuts to potential hikes.

South Africa’s reliance on refined petroleum imports from Gulf countries makes it vulnerable to disruptions in the Strait of Hormuz. Diesel prices are rising faster than petrol due to import dependence.

The IIF also expects the current account deficit to widen to 1.1 percent of GDP. Government debt is projected to ease gradually, but risks from global energy prices remain elevated.

Despite the challenges, some sectors such as mining and logistics could benefit from shifting trade routes and higher commodity prices.

The outlook highlights South Africa’s exposure to external shocks and the need for stronger domestic energy resilience.