Treasury forecasts 2021 GDP growth of 5.1%

The National Treasury is forecasting SA’s GDP growth to come in at 5.1% this year, according to the 2021 Medium-Term Budget Policy Statement (MTBPS) tabled by new Finance Minister Enoch Godongwana on Thursday in parliament.

This is marginally lower than the upwardly revised 2021 GDP forecast of 5.3% growth mentioned by South African Reserve Bank (Sarb) Governor Lesetja Kganyago at the bank’s most recent Monetary Policy Committee (MPC) meeting in September.

“Real GDP is forecast to grow by 5.1% in 2021. Output is expected to return to pre-pandemic levels in 2022, a year earlier than estimated in [the] February [main budget],” the 2021 MTBPS presentation states.

“This is largely the result of global demand, higher commodity prices and the easing of Covid-19 lockdown restrictions,” it points out.

“The South African economy grew faster than expected in the first half of 2021, but this momentum is expected to wane following public violence in July, port and rail disruptions, and the third wave of Covid-19 infections,” the statement however adds.

While acknowledging SA’s electricity challenges, the MTBPS did not make mention of the significant increase in load shedding (up to Stage 4) by Eskom over the past few weeks and the possible impact on growth prospects.

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Following the Sarb’s September MPC meeting, Kganyago said that the bank’s revised estimate for 2021 third quarter economic growth is -1.2%, compared to the previous -0.5% (at its July meeting).

National Treasury’s revised 2021 GDP forecast of 5.1% is notably up on its February estimate of 3.3% growth. However, it is now forecasting slower GDP growth in 2022 of 1.8%, compared to the February budget forecast of 2.2 %. The forecast for 2023 is just 1.6%.

In its latest MTBPS, the Treasury cautions that while SA’s GDP growth is expected to recover in 2021 year, GDP is forecast to weaken to an average of 1.7% growth over the next two years – “a rate that is too low to meet the country’s development needs”.

While Treasury and other government agencies had originally forecast GDP plunging by around 7.5% in 2020 due to the financial fallout from the Covid-19 pandemic, the real GDP decline came in slightly better, at -6.4%.