THE FUSE

Finance minister Enoch Godongwana struck an upbeat tone regarding South Africa’s medium-term growth prospects, saying even though his growth forecast for this year slipped, the economy was well-placed to grow by an average of 1.8% in the medium term.

The minister tabled his medium-term budget policy statement (MTBPS) in parliament on Wednesday. The tabling comes as the economy has consistently struggled to break past the 1% annual economic growth mark under elevated debt levels.

Tabling the statement in parliament, Godongwana said the country’s economic growth prospects were shaped by domestic factors and global developments, but the country was poised to enter better growth levels than it had achieved in recent years.

“We forecast real GDP growth of 1.2% for 2025, more than double the economic growth in 2024. The growth outlook strengthens moderately over the medium term. We forecast real GDP growth will average 1.8% between 2026 and 2028.”

The MTBPS document said: “This year the economy is forecast to grow by 1.2%, down from the 1.4% estimated in the 2025 budget. Over the next three years, the economic outlook strengthens, with GDP growth forecast to average 1.8% annually.”

Speaking to reporters at a briefing ahead of the medium-term budget tabling, deputy minister of finance Ashor Sarupen said the government of national unity understood the “low-growth trap” the country faced.

“Escaping the low-growth trap will require a number of interventions, including structural reforms. The structural reforms are happening, but we would like to push harder. Dealing with debt is a critical mechanism to get out of the low-growth trap.”

Godongwana said the MTBPS showed government was on track to achieve the fiscal target it set for itself in 2023 and this would go a long way to improve the health of public finances. He projected the budget primary surplus to grow from R68.5bn in 2025-26 to R224bn in 2028-29.

“Debt will stabilise this year at 77.9% of GDP, arresting the long climb in the debt trajectory that began in the wake of the 2008 global financial crisis. Over the rest of the decade, rising primary budget surplus will gradually reduce debt and debt service costs, which consume 21c of every R1 in revenue.”

He said as fiscal discipline, structural reforms and a more accommodative investment environment take hold over the medium term, the main budget deficit was well placed to fall to about 3% of GDP by 2028-29.

“There are clear signs consistent fiscal discipline is paying off in improved investor confidence. This has been aided by sound monetary policy, which has reduced inflation and inflation expectations, enabling lower interest rates.”

Following three budget speech events this year, where disagreement over a proposal to raise value-added tax forced a postponement of one budget and the outright rejection of another, Godongwana said the fiscal outlook had SA on course for favourable growth levels.

“The economy is projected to grow at an average of 1.8% over the medium term. Faster reform implementation would build investor confidence and spur more rapid growth.”

Even after the 2025 Budget was finally adopted in May, Godongwana had to defend his growth projections in his expenditure framework. South Africa has had more than a decade of primary budget deficits, and only began running a primary budget surplus in 2023-24.

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