While South Africa’s 2016 Medium Term Budget Policy Statement (MTBPS) made for sober reading it also offered the possibility of a brighter future.

The statement forecasts three potential long-term risk scenarios:

  • The first envisages a recession in 2017/18, followed by a period of protracted lower growth.
  • The second, anticipates marginally lower growth than the baseline forecast, see chart.
  • The third scenario, expects exports to respond strongly to the weaker exchange rate, and electricity supply to improve, resulting in faster economic recovery.

 MTBPS_fig 3.4png

The MTBPS warns that should we encounter the first two scenarios the country would require higher taxes and reduced spending to stabilise debt; whilst if we are fortunate enough to fall into the third scenario debt stabilisation would be accelerated.