Last week, the World Bank’s latest Global Economic Prospects report offered cautious optimism, forecasting SA growth at 1.3% in 2025 (up from 0.6% in 2024). This week, global attention turns to Davos where the World Economic Forum Annual Meeting commenced today (19–23 January 2026) under the theme “A Spirit of Dialogue.” Discussions are centering on pathways for inclusive, innovation-driven growth amid a slowing and uncertain global economy, with heightened focus on trade tensions, tariffs, and geopolitical risks.
President Trump’s recent announcement of escalating tariffs on eight European allies as leverage for the US purchase of Greenland has intensified concerns over transatlantic relations.
International Market Developments
Recent Fed speakers have been largely cautious, with several (including Governors Barr and Goolsbee and Presidents Kashkari, Barkin, and Musalem) signaling support for holding interest rates steady at the upcoming meeting. Inflation remains elevated, the labour market is stabilizing (unemployment was at 4.4% in December after modest job gains of 50,000), and policy is viewed as near neutral—allowing time for more data before adjustments. While some like Philadelphia’s Paulson see room for easing later in 2026 if inflation continues moderating, others highlight ongoing concerns from tariffs and costs (e.g., medical expenses). Atlanta Fed’s Bostic anticipates GDP growth exceeding 2% in 2026, with inflationary pressures persisting partly due to tariffs.
Markets expect the Fed to hold rates steady this month after last year’s cuts, though views are divided on the extent of further easing in 2026. December CPI came in in line with expectations at 2.7% y/y, with core inflation undershooting at 2.6% y/y, suggesting some cooling after prior distortions.
Local Market Developments
Locally, economic headwinds persist with electricity production declining 7.0% y/y in November (following 5.2% in October) and distribution down 7.4% y/y, underscoring ongoing energy challenges. However, the World Bank’s latest Global Economic Prospects report offers cautious optimism, forecasting SA growth at 1.3% in 2025 (up from 0.6% in 2024), rising to 1.4% in 2026 and 1.5% in 2027. The improvement is attributed to more reliable electricity supply, strong agricultural harvests, and rising business confidence. The World Bank highlights elevated global trade risks for South Africa due to reliance on US markets for goods and commodities, making it vulnerable to fragmentation—unlike most regional peers.