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The National Treasury expects South Africa’s real GDP growth to slow to 0.8% in 2023, as economic performance slips in the face of weaker household consumption.
The National Treasury expects South Africa’s real GDP growth to slow to 0.8% in 2023, as economic performance slips in the face of weaker household consumption. The main reasons for the slower growth of GDP are the high cost of living, persistent power crisis, deteriorating infrastructure, and mounting debt. Bogged down by these factors, the borrowing costs have gone up considerably.
The finance department presented a bleaker economic picture for South Africa when it tabled the 2023 Medium-Term Budget Policy Statement (MTBPS) recently (Wednesday).
The department’s forecast represents a slight downward revision on the 0.9% growth which was forecast at the beginning of the year in the 2023 Budget Review. While coming in higher than the 0.7% growth forecast projected by the South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) in September.
However, the Treasury noted that it expects the economic environment to improve over the next three years, forecasting real GDP growth to pick up to 1% in 2024, 1.6% in 2024 and peak at 1.8% in 2026. The Treasury projects the budget deficit to reach 4.9% of GDP in 2023-23 and later narrow to 3.6% by 2026-27. According to the ministry, gross loan debt is expected to peak at 77.7% of GDP in 2025-26, higher than the 73.6% Treasury forecasted for that same year during the 2023 Budget Review.
The Treasury expects debt-servicing costs to reach R385.9 billion in 2024-25 and R455.9 billion in 2026-27, as a result. Over the MTEF government projects it will have R1.3 trillion in interest costs on its hands.
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To get South Africa out of the economic rut it finds itself in, the Treasury says it will need to adopt a prudent fiscal stance which includes a focus on reduced spending and the stabilization of public debt. This, it says, is the only way to support confidence and growth, as not doing so would weaken the economy’s ability to withstand external shocks.
