Three Charts Show South Africa's Economic Outlook Improving
Windfall revenue from high commodity prices and changes to the way gross domestic product is calculated have brightened the outlook for South Africa’s economy.
With the economy now 11% bigger than previously estimated and tax and mineral royalty revenue likely to overshoot forecasts by 169 billion rand ($11.2 billion), the following charts show how the country’s prospects have improved.
Economists in a Bloomberg survey expect a consolidated budget deficit of 7.1% of GDP in the fiscal year through March 2022, compared with the National Treasury’s February estimate of 9.3% of GDP.
The budget gap for the previous year, when efforts to offset the initial damage wrought by the coronavirus pandemic upped spending and borrowing commitments, is also likely to have improved. Still, at an estimated 11.6% of GDP, it’ll match the largest shortfall on record that was set in 1914.
Finance Minister Enoch Godongwana will present the government’s updated projections in his medium-term budget speech on Nov. 11.
The median estimate of 28 economists surveyed by Bloomberg is for GDP to expand 5.1%. That compares with a previous estimate of 4.7% and comes off a low base in 2020, when virus restrictions caused the economy to shrink the most in at least 27 years. The recovery would have been stronger, were it not for deadly riots and port stoppages that disrupted activity in the third quarter.
With economic growth prospects seen as fragile, only a third of economists see the central bank raising its benchmark interest rate in November from a record-low 3.5%. Six out of 18 economists in a Bloomberg survey expect the South African Reserve Bank to lift the key rate by 25 basis points, while the rest see it standing pat.
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