CAPE TOWN, Oct. 21 (Xinhua) -- South Africa has lowered its economic growth forecast for 2026 to 1.2 percent and announced temporary fuel levy cuts to ease cost-of-living pressures, Finance Minister Enoch Godongwana said on Wednesday.
Godongwana made the announcement while presenting the Medium-Term Budget Policy Statement to Parliament in Cape Town, outlining the country's economic outlook, fiscal position and spending priorities amid heightened global uncertainty.
According to Godongwana, domestic economic activity has lost momentum, particularly in export-linked sectors, as geopolitical conflicts push up global oil prices and raise costs for households and businesses.
"A prolonged conflict in the Middle East, alongside El Nino and its likely impact on producer costs and output, could further weaken domestic growth," he said. Economic growth is forecast at 1.2 percent in 2026, down from the 1.6 percent projected in February, before rising to 1.6 percent in 2027 and 2 percent by 2029.
To ease pressure on consumers and businesses, the government will reduce the fuel levy by 3 rand (18 U.S. cents) per liter for diesel and 1.50 rand per liter for petrol from Nov. 4 to Dec. 1, followed by smaller reductions until Jan. 5, 2027, Godongwana said.
The measures will provide 10 billion rand in support, at a fiscal cost of 10 billion rand in foregone revenue, he noted.
"Because we have rebuilt fiscal buffers, government is in a stronger position to respond, including by providing a temporary fuel levy again," he said.
The 10 billion rand previously transferred to the Central Energy Fund will be returned to the National Revenue Fund and placed in the contingency reserve to finance the relief.
"This intervention will help ease cost of living pressures without compromising the sustainability of the budget," Godongwana said.
Despite the weaker growth outlook, the country's public finances have improved, he noted. The consolidated budget deficit is projected at 3.9 percent of gross domestic product (GDP) in the current fiscal year, down from the 4 percent forecast in February.
For the first time in nearly two decades, South Africa's debt-to-GDP ratio stabilized at 78.4 percent in the 2025/26 fiscal year, the minister said.
The revenue outlook has also strengthened, with gross tax revenue for 2026/27 revised upward by 17.1 billion rand from the February estimate, largely due to higher collections from corporate tax, dividends tax and value-added tax, Godongwana said.
He said fiscal discipline had helped restore confidence in public finances, creating room to respond to economic pressures while maintaining budget sustainability.
The government will continue prioritizing structural reforms, stronger state capacity and growth-enhancing infrastructure investment to support faster and more inclusive economic growth, he added. ■