The SA Daily
22 February 2018
Fiscal steps should stave off downgrade
Elna Moolman
- The budget deficit and debt trajectories have improved, compared to the 2017 MTBPS. The budget deficit is projected to narrow from 4.6% of GDP in FY17/18, to 3.8% in FY18/19 (previously 4.5% in the 2017 MTBPS). The debt trajectory is projected to stabilise by 2022, at 56.2% of GDP. These improvements come on a combination of substantial tax hikes, improved growth, and expenditure cuts.
- The key fiscal adjustments are tax hikes worth R36bn in FY18/19 (which feed through to the outer forecast years); and R85bn of spending cuts over the medium term. These measures are counteracted by the R57bn allocated to free tertiary education.
- The primary budget deficit is forecast to improve gradually from a deficit of 1.2% of GDP in FY17/18, to zero in FY20/21. This is crucial for fiscal sustainability. However, we still see the stabilisation of the debt trajectory as the most important metric from this perspective. This supports our expectation that Moody’s will not downgrade SA next month (see our report Budget 2018 of 22 February).
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