Johannesburg - Treasury will likely revise its growth forecasts substantially lower in the mini budget (MTBPS) which Finance Minister Nhanhla Nene will announce next week, Mohammed Yaseen Nalla and Reezwana Sumad of Nedbank Corporate and Investment Banking said on Tuesday.
They said the mini budget is a good litmus test for how closely the Nene has managed to adhere to the national budget tabled in February.
"GDP data releases since the February budget indicate that a slight miss of the 4.1% deficit-to-GDP ratio may well materialise due to the downward GDP revision after the significant second quarter disappointment, said Nalla and Sumad.
"The current revenue stance represents a mixed picture with the largest disappointment in corporate taxes which are up only 1.9% year-to-date against projected growth of 8.9%."
In their view constrained growth and the consequent revenue erosion will make it difficult to maintain fiscal balance unless there are material expenditure cuts.
Growth in the public sector wage bill remains a key point of contention for Nalla and Sumad.
"The total revised estimate for issuance from National Treasury comes in at R165.61bn for the full fiscal year, 4.3% below the original budget estimate of R173.05bn.
This implies current issuance of R95.37bn represents 57.59% of envisaged issuance for the year, with the remaining R70.24bn likely to be issued over the remainder of the fiscal year," they explained.
"Given the fairly high levels of foreign participation in the local bond market, SA's vulnerability to global and emerging market (EM) risk sentiment cannot be ignored, although, at this stage, we do not anticipate further downgrades to our BBB- (stable outlook) sovereign rating from Standard and Poor's."