KEY POINTS:
- Overall, the October MTBPS brought no surprises, painting a fairly sobering view of SA’s economic and debt trajectories. There were positives in so far as the shift to focus more on greater infrastructure spending and increasing the country’s gross fixed capital formation, and the promise of no more SOE bailouts. However, there were negatives to balance this out, with low overall economic growth predicted over the forecast horizon, while debt levels are still expected to rise further before eventually stabilising.
- The MTBPS sets the stage for the February budget, where we can expect to see more significant policy announcements. Given the realistic and pragmatic presentation of the MTBPS, there will be some scope for positive surprises come February if, of course, the GNU can agree that some difficult choices need to be made in order to set the country on a path to an improved fiscal state.
BASELINE VIEW:
The market reaction to the MTBPS was relatively muted as investors welcomed some of the positive developments but remained cautious given the worsening debt trajectory. Thus it falls on the February budget to really send SA down a more prudent fiscal path. For the ZAR, there are signs of potential fiscal policy tightening ahead, which will be welcomed and could set the stage for a positive 2025. However, unless significant reforms are announced in the coming months, SA’s fiscal state will continue to detract from the currency’s resilience.
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