In a analysis notice printed on Monday (22 February), the Bureau for Financial Analysis (BER) mentioned that these developments embody:
- The increase in South Africa’s export commodity costs, in addition to the better-than-expected GDP restoration within the second half of 2020. This has offered an sudden tax income windfall. Total tax income ought to nonetheless decline by a regarding 10-11% (or R200 billion) in 2020/21, however this could beat the dire October estimate by as much as R100 billion (2% of GDP).
- The federal government-friendly verdict by the Labour Attraction Courtroom in December 2020. This meant that Treasury may proceed with reneging on the 2020 wage adjustment that was a part of the 2018 public sector wage settlement. The estimated price saving is R37 billion, or 0.8% of GDP.
- The price of authorities borrowing has declined since October. This might be short-lived ought to South Africa yields proceed to rise amid the worldwide reflation commerce.
Regardless of these beneficial developments, a really giant important funds deficit of 11.5 to 13% of GDP is anticipated for 2020/21, mentioned the BER.
“Whereas this may be fairly a bit higher than Treasury’s projection for a 14.6% of GDP deficit within the October 2020 funds assertion, it should nonetheless push total gross authorities debt in direction of 80% of GDP.”
An extra notable medium-term enhance appears virtually inevitable, it mentioned.
“The sizeable 2020/21 income overrun does recommend that the procurement of vaccines and the three-month extension of the R350/month particular reduction of misery grant may be absorbed with out the necessity for tax hikes on prime of the R5 billion already pencilled in for 2021/22 and/or additional expenditure reprioritisation.”
It may additionally allow Treasury to chop down on their weekly bond issuance, which must be positively obtained by the bond market, the BER mentioned.
“Nonetheless, in opposition to a backdrop the place future nominal GDP progress and the related authorities tax income is very unsure, further expenditure outlays of roughly R20 billion – say R15 billion for vaccines and R6 billion for the grant extension – spotlight South Africa’s restricted fiscal house.”
The group mentioned that there stays little room for fiscal complacency or slippage on the aggressive expenditure-based fiscal consolidation drive outlined in October 2020.
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