Africa-Press – South-Africa. South Africa is on track to attain the National Treasury’s projected budget deficit for the current fiscal year, or achieve an even more-favourable outcome, due to restrained expenditure and healthier tax collections, BNP Paribas said.
“A combination of spending undershoots and revenue resiliency means that we think the National Treasury now looks on track to meet, or even beat, the main budget-deficit forecast,” BNP Paribas analysts led by Jeffrey Schultz said in a note on Thursday.
The Treasury anticipates a fiscal gap of 4.6% of gross domestic product for the year through March 2026. BNP Paribas previously projected a 4.9% deficit.
While it’s reasonable to expect some catch-up in state spending in the second half of the year, given delays caused by the late passage of the budget appropriations bill, a third of the fiscal year has already passed, and expenditure will be constrained by stricter financial regulations and tighter budgets under the nation’s coalition government, the analysts said.
The budget was twice rejected by some members of the coalition government, which was formed by the African National Congress after it lost its outright majority in last year’s elections, because of proposals to increase value-added tax.
A smaller deficit would be welcomed by investors and the Treasury, as it means less borrowing in a country where debt costs absorb 22% of revenue, squeezing out spending on health and education.
Still, the analysts argue that fiscal consolidation may be hard to maintain in the coming years because economic growth will likely be lower than the Treasury’s 1.6% forecast for next year and 1.8% in 2027.
South Africa’s economy is being hamstrung by structural constraints, including logistics bottlenecks and collapsing infrastructure. It now also faces a 30% tariff on some of its exports to the US.
Finance Minister Enoch Godongwana will provide more details on the nation’s fiscal metrics when he tables the medium-term budget update on 12 November.
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