Economists are optimistic about Finance Minister Godongwana’s upcoming budget but highlight challenges in debt stabilisation.
With just over a week left for Finance Minister Enoch Godongwana to table the government of national unity’s (GNU) first medium-term budget policy statement (MTBPS), two leading economists expressed certainty about the market sentiment remaining positive.
They said the MTBPS required a confidence-building fiscal strategy to strengthen SA’s political economy.
Despite being upbeat about the outlook, Prof Raymond Parsons of the North-West University Business School and University of Johannesburg economics lecturer Dr Frederich Kirsten said stabilising the overall debt-to-GDP (gross domestic product) ratio remained a challenge.
ALSO READ: SA experiencing more than just ‘warm and fuzzy’ feeling over economic progress – Ramaphosa
Economic outlook good
Parsons said the GNU has created “a great advantage of the reform momentum and now the apparent incipient economic recovery in SA”.
“Crucial to the economic outlook will be the GDP growth forecasts that the MTBPS will make over the next three years.
“Another area of focus will be to what extent the MTBPS will set the fiscal scene for the main 2025-26 budget next year.
“The MTBPS growth assumptions must be positive, realistic and credible,” said Parsons.
He identified National Health Insurance (NHI) and the basic income grant “as major items needing financing clarification in the MTBPS – how they fit into the overall fiscal plan”.
“A confidence-building MTBPS still needs to be based on a judicious mix of fiscal steps that project good fiscal governance, a credible three-year outlook and sound risk management by government.”
Kirsten said: “The linkage to the NHI is only about financing. Given the high government debt ratio, it is about where money will come from.
“A key discussion point should be about how government collects more revenue.”
ALSO READ: MTBPS: Watch out for these fiscal pressure points – economists
SA will be in a better position next year
Kirsten projected South Africa would be “in a good place to address its challenges by next year”.
“With the economy projected to grow quite significantly by next year, we should see tax revenue also increasing – hopefully assisting government to manage public debt.
“We can expect a positive outlook in terms of the economic growth.
“This will improve the market sentiment towards South Africa, moving forward into 2025,” said Kirsten.
Inflation, he added, would also be “a big talking point, due to it currently being below its 0.5% average”.
Global supply chain and geopolitical conflicts from the outside world could influence South Africa’s domestic markets, Dr Dick Forslund, senior economist with the Alternative Information and Development Centre, said.
“For 20 years, the challenge to the NHI has been how to finance it.
“The opposition from private health corporations to this reform will lose its foothold in the public when there are enough nurses, doctors and other health staff in hospitals and clinics.
“That will happen when vacancies are filled, young people coming out from health education and training are employed and budget cuts reversed.
“Purchases of supply to hospitals must be insourced to end corruption and waste of tax money,” Forslund added.
ALSO READ: SA and US airport agreement to boost economy
