Positive on structural reforms but lingering risk from the execution of the wage bill reduction

Highlights:

• A marginally worse economic environment relative to the June Special Adjustment Budget as economic growth is revised lower.
• Tax revenue underperformance relative to the Special Adjustment Budget’s active scenario that’s already evident.
• The new tax measures of R25 billion over the medium-term that will be announced in the 2021 Budget Review are unchanged and are likely to fall on higher income earners.
• The proposed fiscal consolidation path that now spreads over five years instead of the previous three years looks realistic. This rests heavily on the downward adjustment in the wage bill which we believe may be politically difficult to achieve especially in the current fiscal year, especially with a pending legal dispute.
• Positive structural reforms will underpin the economic recovery and long-term economic growth potential; however, this is conditional on a successful implementation.

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