Budget predictions 2025/2026

It is likely that the National Treasury will make strong projections for economic growth over the medium term. A more conservative approach to the economic growth outlook would, however, provide realism into the outlook for fiscal revenues.

We wish for Budget 2025 to be encouraging to the business community and to lift business sentiment by providing an update on progress made in key economic and structural reforms, as well as solutions towards the country’s energy and logistics challenges.

The National Treasury will reaffirm its commitment to narrowing the fiscal deficit as a tool to stop the rise in public debt (as a percentage of GDP) over the next several years and enable a peak in this ratio. The budget speech will likely have more encouraging deficit forecasts compared to PwC’s forecasts.

We hope that the National Treasury will stick to its pledge to narrow the budget deficit over the medium term despite pressures on both the revenue and expenditure side of the fiscal coin.

Given the constraints in economic growth and thus the revenue outlook, as well as unanticipated expenditure demands, it is almost inevitable that there will be spending cuts in certain areas. We expect to see reductions in underperforming programmes, especially where allocations have not been fully or effectively utilised.

Due to the much discussed “lack of state capacity”, a lot of funds have gone unspent. We expect that this is where the big target for reductions will be to fund areas where there are new pressures on spending.

Our wish is that the finance minister is clear on where the funding for the spending on expansive HIV programmes, expanded and increased Social Relief of Distress Grants and additional allocations for the country’s defence budget will come from so that the trade-offs with other competing needs are clear.

The Government’s inability to contain debt within the committed fiscal framework risks compromising South Africa’s credibility in the investor community, especially within the context of the sub-investment grade rating.

We expect the budget will kick the can of reducing the debt burden down the road, rationalising that all borrowing will be for capital expenditure and thus will be GDP and revenue inducing.

Our hope is that the National Treasury comments on some form of debt ceiling or enhanced fiscal rule to anchor expectations about how the future of debt will be managed.

It is imperative that Budget 2025 provides an update on whether the government will be rationalising SOEs given the risks that underperforming SOEs pose to the fiscus.