South Africa Cuts Growth Forecast as Budget Outlook Improves

South Africa’s medium-term budget outlook improved on stronger tax collections, but the government cut its 2026 economic growth forecast to 1.2% from 1.6% in February, highlighting the challenge of turning temporary revenue gains into sustained expansion. Finance Minister Enoch Godongwana presented the Medium-Term Budget Policy Statement on October 21. Treasury projects the consolidated budget deficit at 3.9% of gross domestic product in the 2026/27 financial year, compared with its February forecast of 4.0%. It also expects growth to reach 1.6% in 2027 and 2% by 2029. Treasury raised its gross tax revenue estimate for 2026/27 by R17.1 billion against the February projection, citing stronger collections from corporate tax, dividends tax and value-added tax. Godongwana said much of the increase reflected higher commodity prices and could fade over the medium term, leaving the improved revenue outlook vulnerable to a reversal in those gains. The growth forecast was lowered amid global and domestic economic pressures. Godongwana cited global conditions, the risk of a prolonged conflict in the Middle East and El Niño as risks to activity. Treasury has also identified R38 billion...