Budget 2024 underscores South Africa's fiscal challenges against the backdrop of a marked economic slowdown

SOUTH AFRICA - Report 22 Feb 2024 by Iraj Abedian

Finance Minister Enoch Godongwana yesterday delivered Budget 2024, which also represented the last Budget of the 6th South African democratic administration. In his speech, the Minister made it clear that the biggest challenge to the fiscus is that “the size of the pie is not growing fast enough to meet our developmental needs”. For one, the forecast for real GDP growth in 2023 was revised downward to 0.6% from the previously estimated 0.8% (Medium Term Budget Policy Statement ((MTBPS)) 2023), primarily attributed to weaker-than-expected outcomes in household consumption and fixed investment, particularly taking into account the disappointing growth in the Q3 2023. However, a modest recovery is anticipated in the coming years, with growth projected to average 1.6% between 2024 and 2026. This outlook, however, hinges on various factors, including the anticipated moderation of power cuts due to new energy projects, lower inflation supporting household consumption, and credit extension. Nonetheless, the overall anticipated deceleration in economic growth poses a significant challenge to government finances.

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