MTBPS: Absa's initial view
Kwaku Koranteng, Head of Institutional Business at Absa Multi-management
Peter Worthington, Senior Economist at Absa
“This budget was an honest reflection of the situation in South Africa. Government is committed to clamping down on corruption, inefficiencies and restoring state-owned entities to health. We, however, foresee that the market may be slightly disappointed.” – Koranteng.
“The MTBPS adopted a weaker macroeconomic backdrop as expected, but we think the National Treasury’s nominal GDP projection could still be too high. The National Treasury now expects real GDP growth of 0.7% in FY 2018/19 (versus Absa’s 0.4 %) and GDP inflation of 6.2% (versus Absa’s forecast of 5.5%) for a total projected nominal GDP growth of 6.9%, a full percentage point higher than Absa’s forecast of 5.9%. The difference between the two nominal GDP forecasts equates to a difference in the tax base of about ZAR47bn. If nominal GDP growth proves closer to Absa’s forecasts than National Treasury’s, there could be further pressure on revenue collections.” – Worthington.
“Deficit targets and debt trajectory are now quite a bit worse than envisaged in February, and debt to GDP is now projected to peak only in 2023/24.” – Worthington
“Expansion of the list of zero-rated VAT goods is very marginal.” – Worthington.
“The tenor of Finance Minister Mboweni’s speech was notably more robust than the MTBPS itself and suggests that he may push for a stronger policy stance in the 2019 Budget.” – Worthington.
