2025 MTBPS Review

Key points

• The 2025 Medium-Term Budget Policy Statement brought a few surprises to the table, and is seen as mostly positive. The main point is the formal implementation of a new inflation target regime, which focuses on a 3% target that has a tolerance band of +-1ppt. This will bring some short-term pain, as evident in higher debt/GDP forecasts, but is necessary to achieve sustainable longer-term fiscal and economic stability.
• The growth outlook remains weak, with real GDP growth forecast at a meagre 1.2% to 2% over the forecast horizon. The lower inflation target will constrain near-term growth to some degree, but the main driver remains inefficient policy. This is being addressed only gradually, and unless major reforms are announced at the 2026 Budget, SA’s growth outlook will remain subdued.
• NT is focused on improving service delivery and infrastructure growth, but spending capability is limited. Positively, processes are being implemented to streamline private sector participation and SOE reform. A new infrastructure bond is also planned to support future infrastructure plans.

BASELINE VIEW:

The MTBPS was largely in line with expectations but had a few positive, unexpected announcements that drove a strong market reaction. Overall, South Africa’s fiscal picture remains a concern, but today’s announcements have at least made it clear that National Treasury is trying to do what it can, given political and economic constraints, to prevent any further deterioration. As always, implementation will be key, but for now, South Africa will reap some benefits of improved investor sentiment and potential positive credit rating actions.