South Africa’s government forecasted higher budget deficits and debt for the next three years, even as improved electricity supply suggests better growth prospects. In its first budget review since forming a coalition, the National Treasury projected a 5.0% deficit of national output for the fiscal year ending in March 2025, up from the 4.5% previously forecast.
For the next fiscal year, the deficit is expected to be 4.3% of GDP, compared to the earlier 3.7% estimate. The rand weakened following these announcements. Revenue collection is under pressure due to declines in fuel and import taxes, and Finance Minister Enoch Godongwana emphasized the need for tough fiscal decisions in light of limited growth.
South Africa’s debt is anticipated to stabilize at 75.5% of GDP by 2025/26. Economic growth is forecasted at 1.1% this year, slightly below the previous estimate, but expected to reach 1.7% by 2025.
The Treasury noted improved investor confidence due to reduced power blackouts and emphasized infrastructure development as key to growth, aiming to attract private sector investment for public projects.