The Medium Term Budget Policy Statement (MTBPS) will be presented on November 1 by Finance Minister Enoch Godongwana.
According to the ministry, MTBPS plays a critical role in the overall budget process, as it sets out the policy framework for the budget that is presented every February.
“It also provides the country and its elected representatives with an update on the National Treasury’s economic forecasts, adjusts the budgets of government departments, and makes emergency changes to spending,” according to the treasury.
A number of financial institutions will look at what government presents in terms of the financial growth of the State and also what it forecasts for next year.
Nedbank noted on Friday that it expects government to say that real GDP growth for 2023 was at 0.6% and there will be 1.1% in 2024; this is slightly lower than the National Treasury’s February forecast of 0.9% and 1.5%, respectively.
It also said that there are risks to growth and they remain on the State, “due to uncertainties surrounding load shedding, transport bottlenecks, fading global growth momentum, subdued international commodity prices, and the slowdown in domestic demand due to higher interest rates”.
The bank argues that government is likely to revise its growth forecasts, and this is slightly lower than expected.
In terms of revenue, Nedbank expects that tax collections will fall short of the February 2023 budget estimates by around R47 billion in 2023/24 and R156 billion over the Medium-Term Expenditure Framework (MTEF) (2023/24 to 2025/26) period.
"Weaker-than-expected nominal GDP, accompanied by lower commodity prices and tougher domestic operating conditions, has reduced corporate profits and therefore tax revenue.”
Nedbank says that, as a result, they forecast revenue growth for 2023/24 at a low of 1% versus 3.5% in the Budget 2023.
In terms of expenditure, Nedbank said that the “public sector wage bill remains a significant challenge to the government’s objective to keep non-interest recurrent spending under control”.
“We expect expenditure to increase by 6% in 2023/24, overshooting the 3.4% increase projected in February. The National Treasury will likely remain committed to containing expenditure growth over the MTEF period.
Unfortunately, the bank believes that government spending will remain high. They argue that “the rising debt service cost, higher social transfers, and bailouts to public entities such as Transnet” will be reasons for this.
“We expect the consolidated budget deficit to widen to 5.5% of GDP in 2023/24, much higher than the 4% projected in the National Budget. The deficit remains wide over the MTEF period, averaging 5.3% a year. Therefore, the primary balance returns to a deficit (-0.4% of GDP) in 2023/24 after the 0.8% surplus recorded in 2022/23.”
Lastly, Nedbank said that they expect small primary surpluses from 2025/26.
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