Page 22 - Provincial Treasury Estimates.pdf

Overview of the Provincial Revenue and Expenditure (OPRE) Financial Year 2023/24
For the coming short-to-medium term the outlook for the South African economy is expected to be subdued due to
weaker global demand and moderating commodity prices, and persistent electricity supply disruptions. Furthermore
higher inflation is expected to continue weighing down on short-term growth as short-term borrowing costs remain
elevated. Inefficiencies in logistics, domestic transport and ports operations represent some the long-term structural
challenges that need to be resolved in order to recover the domestic economy’s growth potential.

For the near-term National Treasury has downwardly revised its growth forecast for the domestic economy for 2023 to
0.9 per cent, a 0.5 percentage point reduction from an initial projection in the 2022 MTBPS. Real Gross Domestic
Product (GDP) growth is projected to average 1.4 per cent from 2023 to 2025, compared with the 1.6 per cent in the
2022 national MTBPS.

Table 1.1 Macroeconomic projections and performance
Percentage change 2019 2020 2021 2022 2023 2024 2025
Actual Estimate Forecast
Final household consumption 1,2 -5,9 5,6 2,6 1 1,5 1,8
Final government consumption 2,1 0,8 0,6 0,9 -2,2 0,4 0
Gross fixed-capital formation -2,1 -14,6 0,2 4,7 1,3 3,8 3,5
Gross domestic expenditure 1,4 -8 4,8 3,8 0,9 1,5 1,8
Exports -3,4 -11,9 10 7,5 1 2,2 2,9
Imports 0,4 -17,4 9,5 14,2 1,1 2,3 2,9
Real GDP growth 0,3 -6,3 4,9 2,0 0,9 1,5 1,8
GDP inflation 4,6 5,7 6,2 4 3,5 4,9 4,6
GDP at current prices (R billion) 5 613,7 5 556,9 6 192,5 6 638,3 6 894,8 7 338,3 7 814,5
CPI inflation 4,1 3,3 4,5 6,9 5,3 4,9 4,7
Current account balance (% of GDP) -2,6 2 3,7 -0,4 -1,8 -2 -2,1

Sources: National Treasury, SA Reserve Bank and Stats SA

On the demand side, final household consumption growth is expected to be moderate averaging about 1.4 per cent
over the medium-term reflecting the effects of rising borrowing costs and slowing credit extensions to households, and
the slow improvements in domestic employment outlook. Sustained inflationary pressures are expected to persist thus
eroding household budgets and purchasing power.

In terms of government, consumption expenditure growth is projected to slow down over the near-term partly reflecting

the changing composition of government expenditure towards capital expenditure, and tightening fiscal consolidation
measures to limit the growth of budget deficits. This is in line with government’s macroeconomic policy framework of
forwardly guiding economic growth whilst ensuring fiscal sustainability in the midst of an uncertain outlook.

Gross fixed capital formation is expected to grow moderately in 2023 following significant expenditures by general
government and public corporations both in 2021 and 2022. Capital spending by the general government increased in
2022 largely as a consequence of capital outlays or infrastructure expenditures by provincial

5