IMF: The global economy is projected to grow 5.5 per cent in 2021 and 4.2 per cent in 2022, while South Africa is projected to grow 2.8 per cent in 2021, decelerating to 1.4 per cent in 2022.
Treasury: SA real GDP growth expected to average 2.1% over the medium term & only returning to pre‐pandemic levels in 2024.
Risks: i) weaker‐than‐expected growth, ii) continued deterioration in the public finances, and iii) a failure to implement structural reforms.
The 2021 Budget Review states that a gradual recovery in revenue is expected over the medium term.
The tax‐to‐GDP ratio now stands at 24.6 per cent. A strong and sustained economic rebound is required for the ratio to return to pre‐COVID‐19 levels of 26.3 per cent of GDP. The 2021 Budget Review, in recent months, faster revenue growth has provided the government with the space to support the economy and the health sector, while narrowing the consolidated budget deficit more rapidly than projected in October 2020. The consolidated budget deficit is projected to narrow from 14 per cent of GDP in 2020/21 to 6.3 per cent of GDP in 2023/24.
Gross debt is projected to stabilize at a lower level of 88.9 per cent of GDP in 2025/26. Over the past decade, increased government spending has failed to promote growth. Since 2008, real spending growth has averaged 4.1 per cent annually, well above annual real GDP growth of 1.5 per cent.
Yet despite high levels of expenditure, supported by increased debt accumulation, growth has not recovered to pre-2008 levels.
Last year, the consolidated fiscal deficit was projected at 15.7 per cent of GDP, up from 6.4 per cent of GDP in 2019/20. Over the medium term, debt-service costs have been the fastest-growing item of spending. Failure to address the deterioration in the fiscal position could lead to a sovereign debt default, which would result in a reversal of many gains of the democratic era.