Sovereign credit rating upgraded for the first time in 16 years - South African economy enters a turning point

The South African Ministry of Finance recently predicted that the South African economy is expected to grow by 1.6% in 2026, higher than the 1.4% growth rate in 2025; The average economic growth rate for the next three years is expected to be 1.8%. The strict fiscal discipline and structural reforms implemented by the South African government are achieving phased results, and the country's fiscal situation has reached a turning point. Recently, it has achieved its first sovereign credit rating hike in 16 years.

According to the 2026 Budget Assessment Report submitted by the South African Ministry of Finance, the main budget deficit in South Africa has decreased from 5.1% of GDP in the 2021/22 fiscal year to 4.5% in the 2025/26 fiscal year, and is expected to further decrease to 3.1% by the 2028/29 fiscal year. The upgrade of the country's sovereign credit rating has directly reduced the country's international borrowing costs, and the government debt has stabilized and is about to enter a downward trend. The inflation rate in South Africa will drop to 3.2% in 2025, the lowest level since 2004. The South African Ministry of Finance stated that the enhancement of monetary policy certainty and the continued implementation of fiscal strategies have formed a virtuous cycle. Lower inflation levels and stronger public finances can help boost market confidence and create a more favorable environment for private investment.

The South African economy is showing a gradual stabilization and recovery trend, with significant driving effects from agriculture, tourism, green industries, and other sectors. According to recent data released by the South African Agricultural Chamber of Commerce, South Africa's agricultural exports will reach a record high of $15.1 billion in 2025, a year-on-year increase of 10%. The growth of agricultural production and the diversification of export markets policies jointly promote the growth of agricultural exports. The tourism industry contributes about 9% of South Africa's gross domestic product and creates approximately 1.5 million job opportunities. In 2025, South Africa received a total of 10.48 million international tourists, a year-on-year increase of 17.6%, setting a new historical high. After the launch of the Tourism Growth Partnership Program, jointly developed by the government and industry and led by the South African Tourism Business Council, the focus will be on improving travel convenience, tourist safety, and other aspects. South Africa is also accelerating the process of green transformation. Since March this year, South Africa has implemented tax deduction policies related to new energy vehicles, vigorously supporting the development of local battery manufacturing industry. With the surge in global demand for key minerals required for industrial green transformation, South African mining has also achieved rapid growth.

Currently, the South African economy is also facing some development difficulties. As a net importer of oil, South Africa relies entirely on importing crude oil from the Middle East region. The recent Middle East conflict has led to an increase in international oil prices, directly pushing up domestic fuel prices in South Africa. South African economist Sandilei Swana believes that rising energy costs will push up inflationary pressures, and the global risk aversion will also lead to some capital outflows from emerging markets, exacerbating the depreciation of the South African rand and the risk of financial market volatility. In addition, the insufficient transportation capacity of South African transport companies has long constrained mineral exports, port congestion and low railway freight efficiency have hindered the export of bulk commodities, and logistics bottlenecks are also affecting the further release of economic vitality.

China is South Africa's largest trading partner, and South Africa is China's largest trading partner in Africa. In recent years, economic cooperation between China and South Africa has been deepening. At the recent 9th meeting of the Central South Economic and Trade Joint Committee, the two sides signed a framework agreement for a joint development economic partnership, which will jointly promote the development of South Africa's manufacturing industry and agricultural transformation and upgrading, and enhance the global market competitiveness of related industries. The agreement also lays the foundation for South Africa to enjoy "zero tariff" treatment for 100% tariff items exported to China in a manner that complies with WTO rules. South African media reports believe that China is a reliable partner for South Africa's economic development, and the continuous improvement and upgrading of economic and trade cooperation between the two countries will help South Africa enhance its economic resilience.