MTBPS – Comment from EY Africa Chief Economist Angelika Goliger
EY Africa Chief Economist Angelika Goliger
The next few years will be tough to say the least, and the MTBPS acknowledges this. The growth outlook remains muted, with GDP expected to come in at 1.4% in 2023 and reach 1.8% by 2025 – an average of 1.6% per annum over the MTEF period. Inflation is expected to reach a high of 6.7% in 2022, moderate to 5.1% in 2023 and reach 4.6% in 2025 – a touch above the SARB’s 4.5% mid-point, signaling that inflationary pressures will remain in the medium-term.
The higher tax revenues from elevated commodity prices will wind down, and loadshedding will continue to be a ceiling on economic growth, until the pipeline of privately-funded energy projects starts coming through.
At the same time, the MTBPS document highlights some positives. The budget deficit is expected to narrow to 3.2% of GDP in 2025/26 from 4.9% in 2022/23 and gross debt to GDP is forecasted to reach 63% by 2030/31. However, this optimistic picture does not include key fiscal risks, namely: the outlook for the public sector wage bill, the plan for Eskom debt, and prospects for the basic income grant – beyond the extension of the COVID-19 social relief of distress grant to March 2024. These have not been explicitly accounted for in the MTEF estimates, over Treasury’s concerns that this would pre-empt the outcome before critical negotiations.
Clarity on the detail has been pushed to the February budget.
Proceeding cautiously around the big decisions is the right approach given the current climate of uncertainty. However, the scenario modelling around the impacts of these critical fiscal risks should have been presented in the MTBPS document, to add pragmatism to the outlook.