The broad economic and fiscal strategies outlined in the 2025 Medium-Term Budget Policy Statement (MTBPS) are realistic and credible given South Africa’s challenging economic context.
In commenting on the 2025 MTBPS that Finance Minister Enoch Godwanga presented to Parliament on 12 November, Prof. Raymond Parsons, economist from the North-West University (NWU) Business School, believes it represents a visible turning point in advancing the priorities of a stable, growing, competitive and inclusive economy.
“Policy continues to gradually move in the right direction to build resilience, create fiscal buffers and stabilise public indebtedness amid adverse global headwinds. The increased emphasis on collaboration with the private sector to enhance delivery, notably through Operation Vulindlela, was a constant and welcome theme. The overall message of the MTBPS was a confidence-building one.”
Prof. Parsons says Finance Minister Enoch Godongwana recognised that all roads ultimately lead through higher job-rich growth, with the priority now being to lift gross domestic product (GDP) closer to levels that can meet South Africa’s developmental needs.
“The forecast of real GDP growth averaging 1,8% between 2026 and 2028 is encouraging, but remains inadequate to address the deep structural and socio-economic challenges of the country. It is based on a recovery in investment. While fiscal sustainability is gradually being restored, uncertainty remains about whether stronger revenue performance will be sufficient to offset the R20 billion in potential tax increases signalled for the February 2026 Budget.”
According to Prof. Parsons, the decision to implement a 3% inflation target with a 1% tolerance band over two years represents a significant shift in South Africa’s monetary policy, but is a flexible framework. He says while it strengthens policy credibility and aligns with the goal of lower inflation expectations, it also entails short-term fiscal and growth trade-offs.
“The finance minister recognised that there would be short-term fiscal costs of a lower target, which include a lower GDP and revenue growth, which will make achieving fiscal targets even more challenging. Inevitably, interest rates and hence borrowing costs are also likely to remain higher for longer for business and consumers.”
Prof. Parsons says the overarching message of the MTBPS is that accelerated structural reforms remain the most effective pathway to much higher job-rich growth.
“Implementation will be key – ensuring that reform commitments under Operation Vulindlela and other processes translate into tangible improvements in confidence, investment and service delivery. Weaker growth would undermine the fiscal trajectory. South Africa’s economic steersmanship must continue to stay on the right track, ensuring that the tailwinds outweigh the headwinds as we move into 2026,” he concludes.
