After an economic year that few could have predicted, we asked two economists to look into their crystal ball to see the economic trends we can expect this year.
The global economy changed in the space of one year in 2025 due to the United States (US) tariffs and other geopolitical issues that made countries less likely to cooperate and more likely to view each other with suspicion.
The picture that Sanisha Packirisamy, chief economist and Tshiamo Masike, economist at Momentum Investments, paint in their economic outlook for January will not ensure that you sleep better at night, but it should also not keep you up.
They say companies are adjusting to a more fragmented and uncertain world.
“In the US, the pre-order shield has vanished, with tariffs now driving unit cost increases for many. Small businesses are most exposed, while larger firms absorb costs with their scale.”
Meanwhile, European companies are confronting high energy costs, carbon border taxes and supply chain fragility, forcing them to adopt efficiency-driven strategies, they point out.
“In China, anti-involution policies and high-tech manufacturing are providing selective growth amid a property slump.
“South African businesses are meanwhile prioritising de-risking, and South to South trade is expected to offset structural constraints.”
ALSO READ: 10 economic surprises of 2025: US tariffs, firmer rand and credit upgrade
Looking ahead, Packirisamy and Masike expect to see these trends in 2026:
Economic trend #1: The post-war liberal order continues its quietly unravelling
The architecture of the post-war liberal order is loosening piece by piece, even if the shifts are quieter than the headlines suggest. “A growing number of governments are steered by populist or hard-right formations and their consolidation in office is placing steady strain on institutions once considered untouchable, such as courts, public broadcasters and central banks.”
They say that, on the surface, the world can appear calmer, with brief ceasefires and negotiated pauses in the war offering the impression of stability as conflicts drag on. However, Packirisamy and Masike warn that the underlying landscape is more fragile.
“As long as standing institutional safeguards are weakened or repurposed for geopolitical bargaining, the system becomes more vulnerable to shocks, leaving global politics more brittle than the momentary lulls in tension might imply.”
Economic trend #2: Global central banks stop marching in step
Masike and Packirisamy say global headline figures may suggest an unremarkable year, but the apparent calm conceals widening divergences beneath the surface.
“With growth and inflation moving along increasingly different trajectories, central banks are drifting out of sync.
“Futures markets and overnight indexed swap spreads are indicating three cuts in the US by the end of 2026, no shift in interest rates in the Eurozone, two cuts in the UK and two hikes in Japan.”
ALSO READ: Construction activity best in 11 years, but S&P PMI disappoints again
Economic trend #3: Bond markets write the cheque for fiscal excess
The time when governments could rely on ultra-low borrowing costs and abundant central bank purchases is fading fast, the Momentum economists say. “Debt ratios in advanced economies climbed past 110% of GDP, and investors are no longer treating fiscal slippage with benign indifference.
“Instead, bond markets are differentiating more sharply. Countries demonstrating credible budget discipline are seeing more favourable financing conditions, while those continuing to run large deficits are finding that the bill for past excesses is finally coming due.”
Economic trend #4: Politics’ expanding grip on core institutions
Packirisamy and Masike warn that governments facing weak growth, rising public liabilities, and increasingly impatient electorates are likely to exert greater influence on institutions once treated as technocratic domains.
“Central banks, regulators and state-owned entities may find themselves nudged toward decisions that prioritise political timelines rather than economic logic, whether through pressure to keep monetary policy looser for longer or to adjust regulatory stances that cushion short-term discomfort.”
ALSO READ: Absa PMI for December signals manufacturing still under pressure
Economic trend #5: The global stakes of the 2026 US midterm elections
The 2026 US midterms loom as a pivotal moment for global markets, given their potential to reset the trajectory of American fiscal choices, trade policy and regulatory ambition. “For the rest of the world, the election is less a domestic political event than a determinant of how predictable, or volatile, the US policy environment will be over the next several years.”
Economic trend #6: The municipal test that could rewire SA’s political map
The 2026 municipal elections in South Africa are shaping up less as an ideological contest and more as a judgment on basic governance, Packirisamy and Masike say. “Years of deteriorating local capacity, chronic service failures and unstable coalitions in major metros made competence the core ballot question.
“This backdrop gives the DA an opening. The party has been widening its footprint in Gauteng’s urban middle corridor and in parts of KwaZulu-Natal, positioning it to make further incremental gains in municipalities where frustrations over water, waste management and infrastructure breakdowns run deepest.”
They say if these shifts materialise, the implications will stretch beyond local boundaries. “A meaningful redrawing of urban political loyalties would alter the balance of power heading into the 2029 national election, signalling that municipal performance is becoming a central driver of South Africa’s broader political realignment.”
ALSO READ: Was 2025 a better year for economy and will 2026 bring new successes or challenges?
Economic trend #7: The SA economy catches a quiet current, signalling an upward growth pulse
Packirisamy points out that growth initially disappointed expectations in 2025 as fixed investment failed to ignite due to persistent political uncertainty. “However, growth in South Africa should post at a slightly firmer 1.6% in 2026 from a projected 1.2% in 2025, helped by a mix of cyclical relief and incremental structural gains.
“Firming corporate sector credit growth for renewable energy and working capital requirements, furthermore, sends a welcome growth signal. Fixed investment should gain further traction as the private electricity build-out scales, rail and port reforms move from plans to execution and early logistics partnerships ease bottlenecks.”
Masike expects households to provide a steadier spending floor as inflation settles, real wages turn positive, and interest rate relief filters through. “In addition, a healthier terms of trade position creates a clearer runway for growth to edge higher.
“While unlikely to be a boom, it will mark a clear shift from the stagnation South Africa endured, with growth expected to reach above 2% in 2027, in our view, on broadening fixed investment gains.”
Economic trend #8: Rating agencies likely to reward reform and fiscal prudence
Rating agencies appear increasingly inclined to acknowledge South Africa’s steadier fiscal footing and the gradual, even if uneven, advance of reforms. “While S&P Global reaffirmed its confidence in the incremental gains made in fiscal prudence and economic growth by leaving SA on a positive outlook, Moody’s exercised a higher level of caution, acknowledging economic resilience and reform progress, but remaining wary of structural hurdles.”
The economists also expect debt levels to remain elevated and refinancing demands still sizeable, but the trajectory is looking less precarious than in recent years, they warn.
ALSO READ: Is volatile geopolitics good for the gold price, rand and JSE?
Economic trend #9: With rand support and inflation in check, policy options are expanding
South Africa enters 2026 with a more forgiving macro backdrop, they say, with inflation set to drift higher from a projected 3.3% in 2025 toward 3.5% in 2026, comfortably inside the new 3% ±1 percentage point target band.
“Although the rand remains well-behaved, there are admittedly still lingering upside threats to inflation posed by medical aid tariffs and electricity charges. Inflation should drop further to an expected 3.3% average in 2027 and 2028, in our view.”
Economic trend #10: Treading between tariffs and trade alliances
Packirisamy and Masike point out that South Africa finds itself having to steer carefully between a more protectionist US and the expanding gravitational pull of emerging economic blocs. “Washington’s tariff escalation, coupled with sharper scrutiny of strategic imports, continues to complicate access for several South African exporters, with diplomatic tension over geopolitical alignments adding another layer of uncertainty.
“However, the global trading environment is also opening up new avenues. Deepening commercial links within Africa, helped by the slow but tangible rollout of the African Continental Free Trade Area, are widening markets for manufactured goods and services.
“At the same time, stronger ties with India, Southeast Asia and parts of the Middle East are shifting the composition of South Africa’s export basket toward regions less exposed to US policy swings.”