What to expect from the MTBPS

As South Africa (SA) prepares for the delayed release of the 2025 Medium-Term Budget Policy Statement (MTBPS), it is clear that this year’s fiscal update comes against a markedly different political and economic backdrop compared to the start of 2025.

The February National Budget was abruptly cancelled just before Finance Minister Enoch Godongwana’s address due to political gridlock over the proposed 2% Value Added Tax (VAT) increase. Two revised versions were subsequently tabled in the following months, resulting in the MTBPS being delivered unusually late in November.

Global forces reshaping SA's economic forecast

“When the February budget was conceived, global uncertainty was high, particularly due to United States (US) President Donald Trump’s renewed trade conflict rhetoric,” explains Maarten Ackerman, Chief Economist at Citadel. “The budget, while optimistic on growth, acknowledged persistent fiscal strain, with debt-to-gross domestic product (GDP) projected to peak near 80%, a key justification for the proposed VAT hike.”

Today, the global picture has shifted. The feared fallout from tariff hikes has been less severe than anticipated; the US economy remains resilient, and SA has benefited from unexpected tailwinds. Concerns over the dollar’s reserve currency dominance prompted a surge in gold demand, boosting SA exports. Policy shifts in the US, including the cancellation of electric vehicle subsidies, supported a platinum rally, revitalising SA’s mining sector, lifting the Johannesburg Stock Exchange (JSE) to record highs and strengthening the rand.

Fiscal tailwinds but structural limitations

“These developments have certainly eased fiscal pressure, but the recovery remains largely commodity-driven, not broad-based,” Ackerman notes. “With low productivity and high population growth, SA’s potential growth remains around 1%, far too low to achieve meaningful fiscal consolidation.”

Stronger-than-expected GDP growth and improved revenues from commodity gains have contributed to lower bond yields, from around 11% at the time of the February National Budget to closer to 9% today.

Expectations from the MTBPS remain optimistic

Ackerman expects National Treasury to maintain a disciplined fiscal stance while adopting a cautiously optimistic tone. “Although growth has improved slightly, both the fiscal deficit and debt-to-GDP ratio remain elevated. National Treasury’s revised revenue and growth assumptions will likely reflect optimism that may not fully align with the realities of global and domestic headwinds,” he says.

Citadel forecasts sub-1% growth for 2025, improving modestly to between 1% and 1.5% in 2026. The MTBPS will also come at a pivotal moment for SA’s international credibility, potentially coinciding with the country’s delisting from the Financial Action Task Force (FATF) grey list, an outcome that could support foreign inflows and boost investor sentiment.

The need for accelerated reform and policy certainty

Despite short-term improvements, Ackerman cautions against complacency. “To truly strengthen our fiscal position, SA must accelerate reforms that improve the ease of doing business, reduce red tape, address infrastructure bottlenecks and enhance competitiveness,” he stresses.

He concludes, “Only through sustained reform and growth exceeding 2.5% can SA begin to stabilise its debt trajectory and achieve lasting fiscal consolidation. The key takeaway from this MTBPS must be the importance of policy certainty and reform momentum, without which, even a stronger economy cannot deliver sustainable progress.”