Stagflation is coming as economists say brace for slower growth.

The 43 private- and public-sector economists taking part in this year’s BMR/Unisa Economist of the Year Competition do not expect a rate hike for the remainder of 2026.

These economists make monthly predictions from February to December on key annual or fourth-quarter economic indicators. 

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In their just-released September predictions they do not see any further increase in the prime rate, with their earlier predictions reflecting the rate hike in late September that put prime lending rate at 10.75. 

Professor Carel van Aardt, chief operating officer of the Bureau of Market Research (BMR), also feels it is unlikely South Africa will have another interest rate hike during 2026. 

On Tuesday 6 October the South African Reserve Bank met with the business sector for feedback on the last hike in the Monetary Policy Forum, he says.

In the forum concerns were raised about lower growth and lower consumer spending because of higher interest rates, says Van Aardt, who spoke to an attendee.

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“Industry and economists have raised concerns about a situation of stagflation, which is defined as increasing inflation and lowering growth,” says Van Aardt. 

During lower growth and increasing inflation, the question to be asked is what should be done to contain inflation.

“I think one thing that an increasing number of economists are realising is that because of the lower growth expectations, there’s lower demand and that will also have a dampening impact on inflation.”

In other words, hikes are not needed to contain inflation as spending will be curbed. 

The economists’ September predictions. Source: BMR/Unisa Economist of the Year Competition

Employment forecast 

In February, the economists in the competition predicted that during 2026 there would be 1% growth in employment, which is still not enough to make a meaningful dent in unemployment.  

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In September, the consensus forecast had halved to 0.5%.

Van Aardt says “that’s one forecast that is really scary for me”.

“The implication is that we are moving more and more towards a situation of non-inclusive growth.” 

“Jobs are not being created and what this means over the longer term is that compensation [salary/wage] growth will be slower, and with that, household consumption expenditure growth will also be slower.”    

This will lead to lower consumer spending, which further constrains the economy as about two-thirds of SA GDP is linked to household consumption expenditure. 

Things could be worse

But it is not all bad news. Despite ongoing conflict in the Middle East and rising oil prices, a lot of the predictions about economic indicators in 2026 have not dropped dramatically since February.

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Predictions of the year’s inflation, household expenditure growth and global GDP growth remain unchanged from August.

Economists expect the rand to strengthen marginally to R16.30 to the dollar, the expected current account deficit widened slightly, and long-term government bond yield expectations increased during the past month. 

Van Aardt says, “even though we’ve got problems such as low growth, and Trading Economics is forecasting the Brent crude price to be $106 dollars per barrel during the fourth quarter, there’s an expectation that it won’t have a massive impact on the economy”.

“That’s good because that is reflective of a high level of resilience of the SA economy.” 

Moneyweb is the media partner of the 2026 BMR/Unisa Economist of the Year Competition.

African Media Entertainment (AME) is the owner of Moneyweb.

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