Third try at South Africa budget may point to revenue shortfall of 4.70% of GDP, say economists: Reuters poll
South Africa's National Treasury will likely announce wider budget deficit forecasts on Wednesday as it struggles to find alternative sources of revenue in the absence of stronger economic growth, a Reuters poll of economists found.
The Treasury will project a budget gap equivalent to 4.70% deficit of gross domestic product for the 2025/26 financial year, according to a May 8-19 poll of 10 economists. That is wider than the March 4.60% government projection and the 4.55% predicted in a February Reuters poll.
The economists' forecasts ranged from -5.10% to -4.50%.
Finance Minister Enoch Godongwana is due to return to parliament on May 21 for a third try at passing South Africa's budget after disputes with coalition partners over plans to increase tax revenue, leaving him with a 75 billion rand ($4.1 billion) budget hole.
The poll predicted a narrower deficit in the following fiscal year, 4.40%, still well above the Treasury's last projection of 3.80%.
More than a third of economists who answered an additional question said accelerating economic growth reforms was the most probable option the National Treasury would rely on to increase tax revenue.
Weaker growth, however, was the biggest risk they saw to the government hitting its medium-term consolidation targets.
"Public finances are weak with fiscal consolidation slow due to increased spending pressures, while tax revenue growth is constrained by a weak economy," wrote Tatonga Rusike, Sub-Saharan Africa economist at Bank of America Securities.
Growth forecasts for 2025 were cut to 1.5% in a separate Reuters poll late last month.
Higher borrowing costs have exacerbated government efforts to lower payments on public debt.
The survey also showed South Africa's gross debt-to-GDP ratio will be 77.0% in the new financial year compared with 76% in the February poll.
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