Analysts say they expect National Treasury to upwardly revise Gross Domestic Product (GDP) to just over 5% for this year. Their comments come as Finance Minister Enoch Godongwana prepares to deliver his maiden Medium Term Budget Policy Statement on Thursday.
It is further expected that tax revenue collections will exceed previous projections by over an R100 billion.
South Africa’s anticipated upward growth revision comes on the back of a global economic recovery supported by robust vaccine rollout programmes in developed economies.
The fast recovery resulted in higher demand for commodities which boosted the country’s export market and revenue collections. Chief Economist at Econometrix, Azar Jamine explains.
“Interest rates have remained at 50-year lows right through this period and is providing quite a lot of resilience to consumers finances, in that regard you’ve got to remember that a lot of people are working from home and for much of the year they haven’t been going out to restaurants or going on holiday because of the fear of COVID-19 so they’ve saved quite a lot of money. Thirdly, and most importantly South Africa has had a bit of a bonanza from the fact that commodity prices have risen around the world very sharply.”
A rebasing exercise performed by Statistics South Africa in August found that the country’s economy is in fact 11% larger than previously estimated. Chief Economist at Investec Annabel Bishop says the rebasing among things should boost this year’s growth number.
“I expect the National Treasury in the Midterm budget policy statement will revise their forecast for GDP close to 5%. This has been the currents that we’ve seen from the Reserve bank, from the IMF. And in fact, one of the reasons for the upward revision is of course the fact that GDP was larger prior to Stats SA revising the figure but of course we’ve also seen stronger growth than they anticipated this year because we’ve also seen the impact of global recovery and the commodity performance.”
Chief Economist at Efficient Group, Dawie Roodt says improved tax revenue contributions from commodity producers and increased export levels should provide significant support towards government spending.
“We saw this very strong commodity cycle and the result of that is that South Africa started exporting like crazy, that we are running a very huge current account surplus, the reserves are picking up because of all of that, and on top of all that tax revenue from the mining industry is doing much much better than previously expected, and I expect the overrun on revenue to be in the region of around R100 billion to R150 billion.”
The sharp global recovery has also been characterised by rising global price pressures, created by strong demand for goods as well as supply chain bottlenecks.
Economist Johan Els on economic growth, social grants and employment ahead of the MTBPS: