Godongwana’s 2024 Budget deficit headache

Enoch Godongwana

South Africa’s 2024 Budget will likely reveal a larger-than-projected deficit as the marked fiscal slippage seen in November last year becomes entrenched.

This is the view of Investec chief economist Annabel Bishop, who said the 2024 Budget – which Finance Minister Enoch Godongwana will reveal on 21 February – is expected to show very similar fiscal ratio projections to 2023’s Medium Term Budget Policy Statement (MTBPS) revisions.

The marked fiscal slippage highlighted in November last year has likely become entrenched, and the fiscal consolidation will, therefore, remain delayed. 

In November 2023’s MTBPS, gross debt was projected to peak at 77.7% of GDP in 2025/26.

This is substantially higher than February 2023’s Budget estimate of 73.6% for the same year. 

Worryingly, gross debt was projected to be above 70.0% of GDP in 2031/32.

Bishop explained that this reduces the sustainability of government finances, as a debt ratio of 60% of GDP is generally seen as the maximum sustainable debt ratio for an emerging market economy.

For the 2023/24 fiscal year, the 2023 February Budget projected gross debt at 72.2% of GDP, which was then pushed up to an estimate of 74.7% of GDP in 2023’s November MTBPS. 

The first three quarters of 2023/24 showed expenditure at 74.2% of the budget. This is far more than the 70.1% spent in the same period in 2022/23.

With government revenue at 71.5% of the budget, a marked drop in South Africa’s projected debt-to-GDP ratio for this year is unlikely. 

The 2023/24 budget deficit was revised weaker, at 4.9% of GDP in the MTBPS versus 4.0% of GDP in February.

Bishop said this is further evidence of fiscal slippage and that the deteriorated budget deficit projections of later years won’t have improved substantially.

She added that South Africa’s October MTBPS growth forecast for 2023 was overly strong, at 0.8%, with the outcome most likely to be 0.5%.

This will add to the upward pressure on the gross loan debt to GDP ratio, not detract from it. For 2024, the MTBPS’s growth forecast is aligned with Investec’s at 1.0%.

For 2025, the MTBPS’s 1.6% is likely to prove too strong, given persistent load-shedding, which risks lifting the gross loan debt projection to GDP for 2025/26 too.

However, Bishop said lowering nominal GDP estimates would increase the gross loan debt projections, worsening fiscal slippage. 


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