South Africa

SARB and Treasury at odds over GDP projections

As part of his budget speech, finance minister Enoch Godongwana revealed the National Treasury expects South Africa’s economy to grow by 0.9% this year. This differs significantly from the Reserve Bank’s projected 0.3% growth.

The Budget Review revealed that Treasury expected South Africa’s economy to grow 0.9% in 2023, followed by 1.5% in 2024, and 1.8% in 2025.

These projections are vital as they are used to calculate South Africa’s debt-to-GDP ratio over the medium term.

Treasury admitted that it is “difficult to assess the economic outlook” due to load shedding being increasingly unpredictable and geopolitical tension ratcheting up.

However, it is still alarming how much Treasury’s projections differ from the Reserve Bank’s.

The Reserve Bank is more pessimistic, anticipating South Africa’s economy to grow only 0.3% in 2023, 0.7% in 2024, and 1% in 2025.

Godongwana, in an interview with 702, said that the large difference between Treasury’s projections and the Reserve Bank’s is the difference in assumed severity of load-shedding in their models.

The Budget Review lists three scenarios for GDP growth to be compared to their baseline projection.

  • Scenario A assumes the full implementation of measures to resolve the energy crisis, with load shedding ending by the beginning of 2024.
  • Scenario B is the worst case, assuming that load-shedding will intensify in 2023 and 2024 with delays in adding new generating capacity to the grid.
  • Scenario C is based on global growth slowing down in 2023, central banks keeping interest rates higher for longer, and reduced appetite for South African assets due to foreign investors looking for safer investments.

Treasury is closer to the baseline in assuming that the severity of load-shedding will be lightened by private sector investment in new electricity generation.

The Reserve Bank, in the latest Monetary Policy Committee (MPC) statement, forecasted “increased load shedding” in each successive year – casting doubt on the government’s ability to implement energy reform.

Treasury and the Reserve Bank agree that growth is “well below the pace required to generate significant employment growth and economic development”.

Private sector GDP projections differ just as widely.

Standard Bank projected growth of 1.3% in 2023 and 1.8% in 2024, whereas ABSA projected 0.7% growth in 2023, 1.8% in 2024, and 2% in 2025.


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