R466bn ‘hit’ as National Treasury lowers SA GDP forecast

South Africa’s National Treasury has lowered its GDP growth forecast for the country (to 1.4%) for 2025, as well as for the next two years (1.6% in 2026 and 1.8% in 2027), in the wake of “international trade volatility and policy uncertainty” due to US President Donald Trump’s tariffs and the resultant threat of a global trade war.

The slower growth over the next three years is expected to have a R466 billion ‘hit’ on the SA economy, Director-General (DG) of the Treasury Duncan Pieterse confirmed in response to questions during a Budget 3.0 media Q&A session on Wednesday.

In the March budget, Treasury forecast 1.9% GDP growth for 2025, 1.7% for 2026, and 1.9% for 2027. However, it had to revise this downwards in the latest budget.

Facing questions about SA’s “weaker fiscal position” reflected in the country’s higher debt-to-GDP forecast of 77.4% in Budget 3.0 (up from 76.2% in the March budget), Pieterse said the downward revision in economic growth “is what’s driving” the increase in debt-to-GDP projections over the next three years, not higher government debt levels or significant increases in spending.

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He said that due to the revision of the economic outlook, SA is now forecast to see “a R130 billion movement” in nominal GDP growth for 2025 – essentially less-than-expected growth.

“In 2026/27, the impact would be around R161 billion, and in 2027/28, around R178 billion … The cumulative effect [of the lower GDP growth] is some R466 billion,” Pieterse later added.

“Included in this is the fact that we ended up with lower-than-expected GDP growth in the last quarter of 2024 [0.6%, instead of the forecast 0.8%]. Remember that the Q4 2024 GDP outcome was not included in the March budget [it was not released at the time],” he explained.

Pieterse said the lower GDP growth forecast effectively “pushed up the debt-to-GDP” or debt as a percentage of GDP metric.

“However, for us, the de facto fiscal anchor is the primary surplus … And that is getting better. We believe our fiscal objectives are on track,” he said, echoing Finance Minister Enoch Godongwana.

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Pieterse stressed that more focus should be placed on SA’s primary surplus and the fact that the forecast budget deficit as a percentage of GDP was still “intact” at 4.6% for 2025/26.

“As global growth has faltered, South Africa’s economic outlook has also weakened, with GDP expected to grow by only 1.4% in 2025. Global risk and economic weakness reinforce the need for us to put our fiscal house in order,” he said in the foreword of the latest Budget Review, tabled with other budget documents in parliament on Wednesday.

“The fiscal strategy remains on course so that government can spend less on debt-service costs and more on critical public services. As per our commitment, government debt will stabilise in 2025/26 at 77.4% of GDP. For the first time since the 2000s, government is consistently running a primary surplus, where revenue exceeds non-interest expenditure,” Pieterse added.

This article was republished from Moneyweb. Read the original here.