In a week packed with economic data, finance minister Tito Mboweni is likely to hog the spotlight on Wednesday as global investors and SA citizens wait to see how much progress has been made in reining in the ballooning budget deficit.
Covid-19 has cut into tax revenue, plunged SA deep into recession and seen the country pushed further into junk status by ratings agencies, but economists now expect the news to be a little better than previously expected.
Amid a strong economic recovery in late 2020 and better-than-expected tax collection, the consolidated budget deficit could be about R90bn smaller than expected in October, according to Momentum economist Johann van Tonder.
Against this background, and using a revenue overrun of about R100bn as an estimate, SA’s budget deficit may come in at 13.8% of GDP, substantially smaller than the 15.7% estimated in the medium-term budget policy statement, Van Tonder said.
Revenue is still expected to be R216bn lower than estimated in February 2020, he said.
Ahead of the budget, SA’s quarterly labour force survey for the last three months of 2020 is due out on Tuesday, with expectations of an increase in unemployment from the third quarter’s 30.8%, a reflection of SA’s weak economic conditions.
In 2020 the effects on employment of weak economic growth and regulatory and policy barriers were worsened by damage to businesses from government-imposed social distancing and other restrictions linked to the Covid-19 pandemic, said Investec economists Kamilla Kaplan and Lara Hodes. Investec expects unemployment to rise to 32.9% in the fourth quarter.
Also on Tuesday, the Reserve Bank’s leading business cycle indicator for December is due and could show the effects of renewed lockdown measures as SA grappled with another wave of Covid-19 infections.
The indicator offers a projection of SA’s economic growth cycle for the next six to 12 months and increased by 1% month on month in November. FNB economists noted that this was considerably slower than the 3.1% rise in October, suggesting the recovery was losing steam.
Producer inflation numbers for January are due out on Thursday, with expectations of an acceleration from December’s 3%, partly due to rising oil prices. The median estimate among three economists polled by Bloomberg was for a 3.1% year-on-year rise in the first month of 2021.
On Friday private sector credit extension numbers for January are due and are expected to show an increase from December’s 3.6% year-on-year growth. Investec expects 3.8% growth in January but added that credit demand remains weak.
Subdued economic activity and depressed levels of business and consumer confidence have dampened loan demand, despite lower interest rates, Investec said.
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