APA-Cape Town (South Africa) South Africa’s Finance Minister Enoch Godongwana has forecast the country’s gross domestic product (GDP) to grow by 0.8 percent in 2023, before bouncing back to average 1.4 percent between 2024 and 2026.
“This is 0.1 percentage points lower than the growth projection at the time of the 2023 budget statement,” the minister said, adding this low growth rate was not sufficient to achieve the country’s desired levels of development.
Godongwana said this when he delivered his 2023 Medium Term Budget Policy Statement (MTBPS) in Parliament in Cape Town on Wednesday.
According to him, the global growth forecasts were also lower at three percent in 2023 from a projected 3.5 percent in 2022.
The weaker growth outlook for China, South Africa’s largest trading partner, and the lower commodity prices on the world markets, have not been helpful, he said.
And the fear that the US interest rates would remain higher for longer meant the global economic environment was less supportive of South Africa’s growth prospects, Godongwana said.
The minister explained that since February risks to the South African economy – including the decline in commodity prices, increased inflation, and a weaker local rand currency – had materialised to weaken the economy, resulting in public finances also getting significantly weaker.
This had led to main budget deficit to increase by US$2.9 billion compared with the 2023 Budget estimates, he said, noting that this reflected lower revenue performance, higher wage bill costs and higher projected debt-service costs.
The main reasons for this are a sharp fall in corporate income tax, particularly from the mining sector – the country’s biggest forex earner – although personal income tax collection was better than forecast, he added.
NM/jn/APA