SA's economic rebound to trim budget deficits

There are speculations that the national treasury could raise taxes more aggressively this year.

23 February 2021 | Economics

Revenue collections have been better than estimated on the back of a stronger-than-expected economic rebound. Isaac Matshego, Economist: Nedbank

South Africa's consolidated fiscal deficit is expected to narrow this year because of an economic rebound, although the long-term trend of higher debt remains unchanged due to Covid-19 and pre-existing spending, a Reuters poll forecast on Friday.

In a poll taken this week, 2021 economic growth was expected to rebound to 3.5% after an estimated 7.4% contraction last year, probably bolstering revenue collections and narrowing deficits for the next financial year to 9.7% of gross domestic product, to 8.5% for 2022/23 and 7.5% in 2023/24.

As in other countries, Covid-19 spending doubled the South African budget last year. The 2020/21 deficit was estimated at 13.95% of GDP in the poll with only about six weeks left.

In October, the National Treasury's consolidated budget estimated a 15.7% deficit of GDP in the year ending March, 10.1% for next year, and 8.6% and 7.3% for the following years respectively.

Nedbank economists wrote that the 2020/21 budget was expected to be much better than presented in the medium-term budget statement in October from the National Treasury.

"Revenue collections have been better than estimated on the back of a stronger-than-expected economic rebound, while expenditure will be slightly lower than estimated, resulting in a narrower budget deficit," wrote Isaac Matshego at Nedbank.

"The budget deficit, however, will be relatively sticky in the medium term as actual expenditure cuts are unlikely to be achieved over the period."

A similar poll in October suggested South Africa's consolidated fiscal deficit would widen further than projected, three months before in an emergency Covid-19 budget, as a third-quarter rebound would not generate enough tax revenues.

Tax

Still, economists have noted speculation the national treasury could raise taxes more aggressively this year in various ways, including a wealth tax or temporary "solidarity" tax to fund things like Covid-19 vaccine procurement, alongside the usual nudges to sin and personal taxes.

However, the "treasury recognises the country's perceived onerous tax burden, not to mention the sharp knock to company profits that has continued to eat into corporate tax receipts in recent years," said Jeffrey Schultz at BNP Paribas.

Consumer inflation was expected to average 3.9% this year and 4.3% next year, still below the midpoint of the Reserve Bank's 3% to 6% comfort level.

"As a result, the main tax measures announced will be in the form of the usual above-CPI increases for excise duties and fuel levies, rather than anything that could risk damaging an already fragile and concentrated tax base," Schultz added.

Gross national debt was projected by the government to stabilise at 95.3% of GDP by 2025/26, more or less in line with the poll's median which expected it at 92.7% in 2023/24.

Growth was expected slow to 2.2% next calendar year and 1.7% the following year. Interest rates were expected to remain unchanged at 3.5% this year, but the Reserve Bank was expected to raise them to 4.0% next year and to 4.75% in 2023.- Nampa/Reuters

Similar News

 

Angola seeks to boost diamond output

1 day - 04 March 2021 | Economics

SERGIO GONCALVESAngola plans to boost diamond mining and open a new large mine in the east, aiming to produce 5.7 million carats there in 2023,...

Fuel prices to create cost pressure

2 days ago - 03 March 2021 | Economics

PHILLEPUS UUSIKU Despite the big increase in fuel prices for the past two months, the impact on inflation should be relatively small.According to Cirrus Capital...

CPBN appoints new board members

2 days ago - 03 March 2021 | Economics

Seven new board members of the Central Procurement Board of Namibia (CPBN) were sworn by the High Court here on Monday, to serve for a...

Team Namibia worried about loopholes in NEEEB

2 days ago - 03 March 2021 | Economics

PHILLEPUS UUSIKUTeam Namibia did not spare its voice and joined other industry and private sector players in questioning the latest National Equitable Economic Empowerment Bill...

Okonjo-Iweala’s job ‘no bed of roses’

3 days ago - 02 March 2021 | Economics

The appointment of Nigeria’s Ngozi Okonjo-Iweala as the first African and first female chief of the World Trade Organisation (WTO) is good news for the...

Virtual currency a lifeline in Kenyan slums

3 days ago - 02 March 2021 | Economics

Kagondu Njagi - Sitting on a low bench at her shop in a Nairobi slum, Grace Wangari sifted through a handful of grains that a...

SA proposes to change pension fund rules

3 days ago - 02 March 2021 | Economics

South Africa's National Treasury is proposing changing rules governing pension funds to encourage investment in infrastructure projects.Africa's most industrialised nation, the hardest-hit by the coronavirus...

Fuel jumps N$1.30 /l in two months

4 days ago - 01 March 2021 | Economics

Jo-Maré Duddy – Consumers have to brace themselves for the second fuel price increase in two months with both the price of petrol and diesel...

Bit brighter green shoots forecast

4 days ago - 01 March 2021 | Economics

Jo-Maré Duddy – Bountiful rains over large parts of Namibia, as well as better prospects for diamond mining and transport convinced the central bank to...

Transparency push for IMF’s currency reserve

4 days ago - 01 March 2021 | Economics

Andrea Shalal - The International Monetary Fund on Friday said it would propose ways to improve the transparency and accountability of how its Special Drawing...

Latest News

Scam: Covid-19 support grant circulating...

11 hours ago | Business

Jo-Maré Duddy – The ministry of finance has warned the public against a message circulating on WhatsApp inviting people to apply for “Covid-19 Support Grant”,...

FirstRand Nam’s profit dives 9.4%

17 hours ago | Business

Jo-Maré Duddy – Locally-listed FirstRand Namibia reported a profit of about N$564.9 million for the six months ended 31 December 2020, a drop of some...

Letshego Nam takes N$60-mln profit...

17 hours ago | Business

Jo-Maré Duddy – Locally-listed Letshego Holdings Namibia reported a profit of about N$341.4 million for the year ended 31 December 2020, a drop of nearly...

Otjikoto sitting on a gold...

1 day - 04 March 2021 | Business

Jo-Maré Duddy – B2Gold’s Otjikoto mine is expected to reach record-level production this year and through to 2024, the Canada-based low-cost international senior gold producer...

Mining survey: Chamber hits back

1 day - 04 March 2021 | Business

PHILLEPUS UUSIKU Too few responses have skewed Namibia's performance on the 2020 Fraser Institute Survey of Mining Companies, tarnishing its image as an attractive investment...

‘Not up to you’

1 day - 04 March 2021 | Education

TUYEIMO HAIDULA ONGWEDIVA Higher education minister Itah Kandjii-Murangi says institutions of higher learning...

Sioka in hot water over...

1 day - 04 March 2021 | Ministries

JANA-MARI SMITH WINDHOEKThe clock is ticking for child welfare minister Doreen Sioka who has less than a month to present a...

Corruption - A social disease...

1 day - 04 March 2021 | Columns

Johan CoetzeeGiven ongoing media articles about governance, manifested in contraction of investment and increasing unemployment, it is appropriate to reflect on several trends covering several...

EDITORIAL

1 day - 04 March 2021 | Opinion

The phony attempts by mainly men in the National Unity Democratic Organisation (Nudo) to undermine its president Esther Muinjangue will only further dissuade women from...

Load More