The Medium Term Budget Policy Statement (MTBPS), due this coming Thursday, is expected to reflect a much better balance sheet for South Africa compared to previous years.
Ordinarily, the MTBPS is a cause for alarm, projecting as it does fiscal policy direction over the next three years, according to the Bureau for Economic Research (BER).
“In recent years, the MTBPS has come as a shock to financial markets,” the Bureau said.
Usually investor concerns are only eased by February when the new budget is presented to Parliament.
Things are looking different though, the BER points out in its latest weekly assessment.
“This trend could be turned on its head this time as the MTBPS will show a much-improved short-term fiscal situation, with a much smaller budget deficit, (potentially close to 5% of GDP versus 9% expected in February) for the 2021/22 fiscal year, and a significantly lower starting point for public debt (around 71% of GDP versus roughly 80% before).”
However, the Bureau added: “The MTBPS may postpone key expenditure decisions, including on possible permanent income support measures once the social relief of distress grant ends in March 2022, to the February budget.
“Therefore, the MTBPS may have two main story lines. The one is a notably improved fiscal situation in the current (2021/22) fiscal year, driven by a sizeable mining tax windfall and the positive impact on the fiscal ratios of higher nominal GDP post Stats SA’s benchmarking/rebasing exercise.
“Importantly, given the temporary nature of the tax windfall and potentially significant future expenditure pressures, the second story line is likely to be a public debt trajectory that remains precarious, albeit from a better starting position.”
