{"id":55954,"date":"2023-11-02T16:07:41","date_gmt":"2023-11-02T16:07:41","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk"},"modified":"2023-11-02T16:17:54","modified_gmt":"2023-11-02T16:17:54","slug":"south-africa-is-at-huge-risk","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk","title":{"rendered":"South Africa is at huge risk"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>The medium-term budget policy statement (MTBPS) delivered by Enoch Godongwana on Wednesday (1 November) showed a major deterioration in South Africa\u2019s fiscal metrics \u2013 and the solutions are deeply negative for the country\u2019s credit status.<\/p>\n

Key among these metrics are the government\u2019s debt-to-GDP ratio and fiscal deficit projections, which Investec chief economist Annabel Bishop says will hit South Africa\u2019s credit rating when major agencies conduct their reviews later this month.<\/p>\n

Godongwana noted that the country\u2019s budget deficit widened by a further R55 billion versus estimates at the time of the February Budget. Revenue collections have also underperformed significantly, with tax coming in close to R57 billion lower than anticipated.<\/p>\n

Treasury has responded to this by implementing budget cuts in the near and medium term (R21 billion in the current financial year and a further R85 billion through to 2026).<\/p>\n

However, budget cuts are not enough to meet the shortfall, and so Treasury will be turning to borrowing to help, increasing South Africa\u2019s debt.<\/p>\n

\u201cOver the medium-term, gross debt is projected to now peak at 77.7% of GDP in 2025\/26, versus February\u2019s Budget estimate of 73.6% of GDP for the same year,\u201d Bishop said.<\/p>\n

\u201cWorryingly, gross debt is projected to still remain above 70.0% of GDP in 2031\/32, and the expanding debt ratio has reduced the sustainability of government finances, with a debt ratio of 60% of GDP instead seen as the maximum sustainable debt ratio for an emerging market economy.\u201d<\/p>\n

Indeed, the Treasury itself warned about the country\u2019s growing debt bill, noting that debt service costs have increased by R52 billion above the amount budgeted in February and that the country is now spending more on servicing debt than on healthcare, public services and social development.<\/p>\n

Citadel Chief Economist and Advisory Partner, Maarten Ackerman said that the tipping of the debt-to-GDP is concerning, but South Africa should be able to avoid a debt-spiral considering that a ratio of 90% was considered the tipping point.<\/p>\n

However, he warned that a study by the World Bank found that countries whose debt exceeds 77% as a percentage of the size of the economy for prolonged periods of time experience significant slowdowns in economic growth \u2013 something South Africa cannot afford given the already weak growth environment.<\/p>\n

Regardless, the escalating debt problem will not go unnoticed.<\/p>\n

Bishop said the budget is credit negative, with the risk of credit rating downgrades having risen for South Africa, and the three key rating agencies, Fitch, Moody\u2019s and S&P to potentially give their country reviews this month.<\/p>\n

Market reaction<\/p>\n

The expenditure cuts have been favourably received by the markets, along with planned tax measures to raise revenue, as lower commodity prices and higher VAT refunds weakened revenue.<\/p>\n

\u201cWhile personal income tax collections have seen resilience this year, National Treasury warns on the weak outlook for employment, while corporate taxes have already seen significant under collection this year, and this is anticipated to continue out to 2026\/27,\u201d Bishop said.<\/p>\n

The rand has strengthened in relief at the modest nature of the proposed tax measures.<\/p>\n

Bishop said that the additional R15 billion is likely to come from no change to tax brackets to account for bracket creep (the effect of higher inflation on earnings), with the tax buoyancies estimated lower over the medium-term.<\/p>\n

The rand is also stronger as markets are relieved at signs of government restraint \u2013 although the credit rating agencies are likely to place the country back on negative outlooks, with risks for downgrades.<\/p>\n

\u201cThe budget is likely the best it could be in the current circumstances but is a poor budget from a fiscal consolidation point of view, with the debt ratios projected substantially higher than in February\u2019s Budget Review,\u201d Bishop said.<\/p>\n

For More News And Analysis About South-Africa<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. The medium-term budget policy statement (MTBPS) delivered by Enoch Godongwana on Wednesday (1 November) showed a major deterioration in South Africa\u2019s fiscal metrics \u2013 and the solutions are deeply negative for the country\u2019s credit status. Key among these metrics are the government\u2019s debt-to-GDP ratio and fiscal deficit projections, which Investec chief economist […]<\/p>\n","protected":false},"author":84,"featured_media":55952,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5],"tags":[274,315,275],"class_list":["post-55954","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-africa-press","tag-africa-press-south-africa","tag-south-africa-2"],"yoast_head":"\nSouth Africa is at huge risk - South Africa<\/title>\n<meta name=\"description\" content=\"The medium-term budget policy statement (MTBPS) delivered by Enoch Godongwana on Wednesday (1 November) showed a major d ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Africa is at huge risk\" \/>\n<meta property=\"og:description\" content=\"The medium-term budget policy statement (MTBPS) delivered by Enoch Godongwana on Wednesday (1 November) showed a major d ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2023-11-02T16:07:41+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-11-02T16:17:54+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2023\/11\/sm_1698929215.477129.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"672\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"South Africa is at huge risk\",\"datePublished\":\"2023-11-02T16:07:41+00:00\",\"dateModified\":\"2023-11-02T16:17:54+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk\"},\"wordCount\":632,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2023\/11\/sm_1698929215.477129.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-South-Africa\",\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africa-is-at-huge-risk\",\"name\":\"South Africa is at huge risk - 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