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Nedbank Expect Budget Deficit to Widen More Than Treasury’s Prediction

SOUTH AFRICA
  • Nedbank say today's MTBPS confirms that the country's fiscal position has weakened significantly. The framework proposes significant expenditure restraint to reduce the country's fiscal vulnerabilities.
  • They say that while this appears to be the only option available over the medium term, the core problem is economic stagnation, caused primarily by the government's failure to restore good governance to critical state-owned enterprises and the sharp deterioration in the quality of essential government services.
  • Nedbank expect that the drop in revenue collections and the higher-than-budgeted expenditure will widen the deficit to 5.5% of GDP in 2023/24, worse than the National Treasury's projection of 4.9% in 2023/24.
  • They add that the sharply higher borrowing requirement will widen the risk premium further and raise debt service costs even more. There is no indication of a debt relief package being extended to Transnet under similar terms to the Eskom package, but Nedbank expect some provision will be made in the February 2024 Budget.
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