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MTBPS Preview November 2025: A narrower budget deficit in FY 2025/26 on strong tax collections and slower expenditure growth.
- Macroeconomic assumptions: The National Treasury will present the 2025 Medium-Term Budget Statement (MTBPS) against the backdrop of a modest domestic recovery and an increasingly tumultuous global landscape. Treasury will likely reduce its GDP growth forecast for 2025 slightly due to shrinking fixed investment and lower exports in the first half of the year. For the next three years, we expect Treasury will reflect an upward trajectory as subdued inflation and lower interest rates sustain consumer spending and easing energy and logistical constraints enable a recovery in fixed investment, offsetting the continued, and potentially deepening, drag from net exports.
- Revenue: Moderately faster growth in domestic demand, elevated gold and platinum prices and more efficient tax collections have boosted revenue. Consequently, we project higher revenue growth in fiscal year 2025/26 (FY2025/26), supported by robust increases in personal, corporate and value-added taxes. Our estimates translate into an overshoot in gross tax revenue of R60 billion in FY2025/26 and R200 billion over the Medium-Term Expenditure Framework period (MTEF, which runs from FY2025/26—2027/28).
- Expenditure: Spending growth in FY2025/26 will likely fall short of May’s projections, mostly due to the long delays in approving this year’s budget. Beyond this year, we forecast moderate expenditure growth in both nominal and real terms. Encouragingly, much lower inflation will likely contain the increase in the public sector wage bill to around 4% over the next two fiscal years. Debt service costs will also rise at a slower rate, due to lower interest rates and softer growth in public debt. Overall, we expect expenditure growth of 6.5% in FY2025/26, compared to the Treasury’s projected 7.5%.
- Budget balance: We project a slightly smaller consolidated budget deficit of 4.4% of GDP for this fiscal year, than the 4.8% projected in Budget 2025. Thereafter, we see the shortfall narrowing slowly, staying above 3% in FY2028/29. Our forecasts indicate that the primary surplus will hover around 2% of GDP by the end of the forecast period.
- Debt metrics: We expect a higher public debt ratio compared with the Budget 2025 estimates due to our lower nominal GDP forecast. The debt-to-GDP ratio will remain sticky, peaking at 78.1% in FY2027/28 and start to ease slowly as the primary surplus widens.
- Policy announcements: The focus will be on the revised inflation targeting framework, but Treasury could also announce a fiscal anchor rule.