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The SA Daily 25 June 2020

A fiscal crossroads

  • National Treasury’s (NT) revised Budget 2020 reflects the COVID-19 impact on our economy, with government’s fiscal position now even worse off; NT now forecasts a massive revenue shortfall of R304bn for FY20/21.
  • The main fiscal deficit is now projected by NT to widen to 14.6% of GDP in FY20/21, from a deficit of 6.8% of GDP in the February-2020 Budget, and to narrow to only 9.3% of GDP in FY21/22.
  • The gross debt trajectory is now significantly higher than Treasury’s February 2020 Budget forecasts. For SA debt, Treasury has presented two scenarios; a passive scenario without government’s corrective policies, and an active one with cabinet-endorsed policy adjustments. In the former, gross debt fails to stabilise and breaches 100% of GDP in FY23/24. In the latter, gross debt peaks at 87.4% in FY23/24.
  • NT expects GDP growth to contract by 7.2% y/y this year; we forecast 8.5% y/y. The IMF’s GDP growth forecast is for a contraction of 8.0% y/y.
  • The SA economy remains at a pressing economic and fiscal crossroads, which reinforces that only tough decisions, including concrete reforms, can incur growth, create jobs, and stabilise debt.

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