By Vuyani Ndaba
JOHANNESBURG (Reuters) – South Africa’s National Treasury budget deficit forecasts will be wider than in its October estimates for the next three years, a Reuters poll found.
The consolidated budget forecast medians of 12 economists polled February 6-13 suggested the National Treasury would announce its deficit forecast at 4.55% of gross domestic product (GDP) in the fiscal year beginning in April, compared with the 4.30% it anticipated in October.
“Spending pressures are increasing due largely to rising debt-service payments given elevated global borrowing rates, social-spending programmes and ongoing support for state-owned enterprises such as debt relief for Eskom,” said Dennis Shen, senior director at Scope Ratings.
“These factors are likely to hinder budgetary consolidation efforts and hold the government deficit at elevated levels and maintain public debt on a structurally increasing path to 80% of GDP before the end of this decade,” Shen added.
Economists expect a deficit of 4.00% of GDP in the following year, 0.40 percentage points wider than the previous Treasury estimate in October.
The deficit is seen shrinking to 3.60% of GDP in the financial year 2027/28.
“We still see debt stabilisation as a credible forecast,” said Elna Moolman, head of macroeconomic, fixed income and currency research at Standard Bank.
“Though the risks have increased and it will be challenging for the government to absorb some of the increased spending pressures via reallocations, we believe, however, that the government is committed to fiscal consolidation.”
State-owned Eskom has been in financial crisis for years and has over 400 billion rand ($21.81 billion) in debt it cannot afford to service.
In October the National Treasury estimated the budget deficit at 5% of gross domestic product (GDP) in the 2024/25 fiscal year.
The survey showed the gross debt-to-GDP ratio accumulated by South Africa will be 76.0% in the new financial year.
By contrast, the sources of revenue are growing slowly. South Africa’s economic growth will expand 1.7% this calendar year and 2.0% next, the survey showed.
Inflation is expected to average 4.0% this year and quicken to 4.5% in 2026.
($1 = 18.3563 rand)
((Other stories from the February Reuters global economic poll))
(Reporting by Vuyani Ndaba; editing by Barbara Lewis)
