Finance Minister Enoch Godongwana said on Wednesday during his Medium Term Budget Policy Statement (MTBPS) that SA's economic outlook looks weak.
“The economic outlook over the medium term remains weak, reflecting the cumulative effect of power cuts, the poor performance of the logistics sector, high inflation, rising borrowing costs, and a weaker global environment,” Godongwana said.
He noted that domestically, Treasury forecasts a 0.8% growth in real GDP in 2023. It should be noted that this is 0.1 percentage points lower than the growth projection at the time of the 2023 Budget.
Godongwana did note that economic growth in SA is projected to average 1.4% from 2024 to 2026.
Sadly, he noted that these growth rates are not sufficient to achieve the State’s desired levels of development.
On the bright side, the minister said that the economy had shown signs of resilience.
GDP performance is now above pre-pandemic levels, according to Godongwana, who said that in the first half of the year, the economy grew by 0.9%, despite record levels of load shedding due to the energy crisis.
There where some sectors within South Africa that had some major growth.
“The tourism sector grew more than 70% in the period, driven by the arrival of more than five million international tourists. Agriculture expanded by 7.8% in the period compared to 2022, while the construction, transport and communications sectors also achieved strong growth.”
BUDGET DEFICIT
Godongwana revealed that the main budget deficit has increased by R54.7 billion compared with the 2023 Budget estimates.
“This figure reflects lower revenue performance, higher wage bill costs and higher projected debt-service costs.”
The minister said that the main reasons for the low figure was the sharp fall in corporate income tax.
He noted that this came particularly from the mining sector, but he did note that personal income tax collection was better than previously forecast.
“The result of the shortfall is a substantial worsening in the main budget deficit in the current fiscal year. We are now projecting a deficit of 4.9% of GDP compared to our previous estimate of 4.0%,” Godongwana added.
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