South Africa’s budget deficit is forecast to more than double to 15.7% of GDP in the 2020/21 financial year, Finance Minister Tito Mboweni revealed in his adjusted or supplementary budget on Wednesday, which comes in response to the Covid-19 economic fallout.
“Covid-19 has turned the global economy upside down… The South African economy is now expected to contract by 7.2 per cent in 2020. This is the largest contraction in nearly 90 years,” he said.
Mboweni noted that the country’s consolidated budget deficit is now forecast to come in at R761.7 billion, equating to 15.7% of GDP in 2020/21.
“This is compared to the deficit of R370.5 billion, or 6.8% of GDP projected in the February budget. This increase is mainly due to the revised revenue projections and pay-outs from the Unemployment Insurance Fund. The narrower measure, known as the main budget deficit, is projected to be 14.6 per cent of GDP,” he added.
Mboweni said that the government’s projected total consolidated budget spending, including debt service costs, would exceed R2 trillion for the first time ever. However, he noted that gross tax revenue collection was significantly down due to the impact of Covid-19 and restrictions both locally and globally.
He said tax revenue collection during the first two months of 2020/21 was R142 billion, compared to National Treasury’s initial forecast for the same period of R177.3 billion.
“Put another way – we are already R35.3 billion behind on our 2020/21 target… As a consequence, gross tax revenue for the 2020/21 fiscal year is revised down from R1.43 trillion to R1.12 trillion. That means that we expect to miss our tax target for this year by over R300 billion,” he added.