Opinions

Key economic takeaways

Treasury projects a significant main budget revenue overshoot of R102.8 billion in the current fiscal year (2020/21) from the Medium Term Budget Policy Statement (MTBPS) total main revenue projection of R1.09 trillion.

This implies that the government’s main budget revenue will decline by a less severe 10.8% instead of the 18.4% envisaged at the MTBPS.

Still, relative to the 2020 Budget, the main budget revenue is underperforming by R197.2 billion, reflecting the profound impact of Covid-19 on economic growth and revenue base.

At 6.8% in 2020/21, the main budget expenditure growth estimate is in line with MTBPS projection, but R38.2 billion higher than the 2020 Budget estimate.

This, together with the projected revenue overshoot, effectively reduces the main budget deficit to R603.4 billion (or 12.3% of GDP) relative to the R707.8 billion (14.6% of GDP) previously forecast at the MTBPS.

For the current fiscal year, gross debt is revised slightly lower at 80.3% of GDP, previously 81.8%. It is now peaking at 88.9% of GDP in 2025/26 (previously: 95.3% of GDP in 2025/26 at the MTBPS) – government’s strategy will be to reduce the borrowing requirement and debt issuance using the higher cash balances over the medium term. Government’s debt-service cost will grow by 13.3% per annum over the medium term, reaching R338.6 billion (5.6% of GDP) by 2023/24.

THIS OPINION PIECE WAS SUPPLIED BY FNB ON BEHALF OF MAMELLO MATIKINCA-NGWENYA, FNB CHIEF ECONOMIST.

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