This marks the sixth consecutive quarter of growth.
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South Africa’s real gross domestic product (GDP) delivered good news for the first quarter of 2026, as it increased by 0.5%, marking a sixth consecutive quarter of growth. But analysts are not very optimistic about the second quarter due to the impact of the conflict in the Middle East.
Statistics South Africa (Stats SA) said finance, agriculture, trade, and transport did the heavy lifting on the production (supply) side of the economy. The expenditure (demand) side was supported by a decline in imports and a rise in household consumption, government consumption and exports.
The stats released on Tuesday showed that the finance industry was the main positive contributor on the production side of the economy, expanding by 0.9% and adding 0.2 percentage points to GDP growth. Agriculture, trade, and transport & communication also made notable contributions
2026 off to a good start
Dr Bonke Dumisa, an independent economic analyst, told The Citizen the 0.5% growth in the first quarter is encouraging.
“It is encouraging that this improvement is in line with the sentiments expressed by the three international credit rating agencies, which said the economic outlook in South Africa is stable to positive,” he said.
He noted that manufacturing was the only sector that contributed negatively. However, Dumisa still found it encouraging that the growth happened despite some challenging global factors.
Middle East conflict expected to hurt GDP
Dumisa said the Middle East conflict started in late February, and the GDP figures for the period were not negatively affected.
“But, we must caution that we are relieved that the USA [United States of America] and Israel started their unnecessary military attacks on Iran only from the end of February 2026, which means that our first quarter figures were not negatively affected by the subsequent skyrocketing fuel prices caused by this unnecessary “Iran War.”
Stats SA said the impact of the Middle East conflict will only be reflected in the second-quarter GDP estimates in September 2026.
“The conflict in the Middle East began towards the end of February, more than halfway through the first quarter. The impact of the conflict was felt in the sharp fuel price increases in April, which may reflect in the second-quarter GDP estimates,” said Stats SA.
Delivered more than expected
Shireen Darmalingam, Standard Bank economist, said the country’s economic growth overshot expectations in the first quarter.
“The first-quarter data, which largely predates the escalation of the Iran conflict and the associated oil price spike, showed relative resilience,” she said.
“Performance in some sectors was supported by idiosyncratic factors; notably, growth in the agricultural sector benefited from favourable weather during the quarter. The manufacturing sector faced headwinds in Q1 and was the only sector to have subtracted from growth.”
She noted that the services sector also remained broadly resilient during the quarter.
Business confidence already down
Darmalingam shares the same sentiments as Stats SA that the impact of the Middle East conflict is yet to be felt.
“Looking ahead, we anticipate a slowdown in GDP growth in the coming quarters, driven by the protracted Middle East conflict and the resulting increase in fuel costs,” she said. “Business confidence has already deteriorated in the second quarter, and we expect mounting pressure on consumers who were already under strain prior to the fuel price shock.”
Darmalingam added that conditions are likely to worsen further from the second quarter as fuel prices and interest rates have increased.
“The impact of the Iran war on SA [ South Africa] economic growth, however, is being counteracted by SA’s elevated terms of trade and support from ongoing policy reforms. We continue to expect a moderate improvement in growth to around 2% over the medium term, although this trajectory has been disrupted by the conflict.”
Expenditure on GDP was also positive
Stats SA’s data revealed that the expenditure side of the economy was lifted by weaker imports, together with a rise in household consumption, government consumption and exports.
“Household consumption expanded by a marginal 0.1%, the lowest growth rate in eight quarters,” said Stats SA. “Household utilities (such as water and electricity) and transport were the largest positive contributors.”
Data also showed that people spent less on food and non-alcoholic beverages, alcoholic beverages, tobacco and narcotics. This was consistent with the zero per cent growth rate in retail trade on the production side of the economy.
According to Stats SA, spending on restaurants and hotels was also down. The miscellaneous goods and services category was the most significant negative contributor, reflecting a decline in insurance expenditure.
Imports and exports
Stats SA attributed the slowdown in imports to weaker trade in precious metals, mineral products, machinery and electrical equipment, textiles and textile articles, and animal and vegetable fats and oils.
While exports increased by 0.5%, driven by a rise in the trade of mineral products, vegetable products (reflecting the rise in the production of fruit in the agricultural industry), and prepared foodstuffs, beverages and tobacco.
“The manufacturing, trade and mining industries dipped into their stockpiles to meet demand, resulting in an annualised R22.4 billion drawdown in inventories,” said Stats SA. “Manufacturing’s drawdown was the largest (-R14.5 billion).”
