Finance minister Enoch Godongwana will present the national budget later this month against the background of a marginally better fiscal trajectory boosted by a small revenue overshoot. We expect this to result in a narrower budget deficit and a larger primary budget (excluding debt-service costs) surplus.
For context: over the past decade SA has significantly underperformed other emerging markets and developing economies due to declining capital investment, inadequate energy supply, unreliable logistics, high cost of doing business, a poor public-sector balance sheet and a weak fiscal position. However, there are green shoots of recovery, particularly on the energy and logistics front, while the fiscal outlook, though still worrying, could continue to benefit from steady GDP growth in the medium term.
We project nominal GDP growth that is marginally below the National Treasury’s current estimates in 2024/25 and 2025/26, due to lower real GDP growth and lower inflation respectively. Thereafter we project firmer nominal GDP growth as reforms bear fruit.
As we approach the budget speech on February 19, we believe much of the negative adjustments to the fiscus took place in the 2024 medium-term budget policy statement (MTBPS). Since then, revenue collection has improved, leading to the prediction of a mild overshoot over the medium-term expenditure framework (MTEF).