By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
Budget Preview: 2025 Medium Term Budget Policy Statement
Finance Minister Enoch Godongwana will table the 2025 Medium Term Budget Policy Statement (MTBPS) on 12 November 2025. Below we provide a brief analysis of the fiscal performance to date within the context of the prevailing domestic and global economic backdrop.
The 2025 Budget Review, informally referred to as Budget 3.0, projected real GDP growth of 1.4% in 2025, increasing to 1.6% in 2026 and 1.8% in 2027. The accompanying downside scenario, presented at the time, anticipated weaker growth of 1.1%, 1.3%, and 1.8% over the same period. The current baseline could come under pressure amid ongoing global trade uncertainty. South Africa continues to face a 30% reciprocal tariff and remains in negotiations with the United States (US) administration to reach a resolution. Meanwhile, both private and public sector fixed investment remain subdued, with private investment down 3.2% year-to-date (January to June), general government investment down 1.4%, and public corporations investment declining by 3.6%. These outcomes fall short of the 2025 Budget's projection of 3.2% growth in total fixed investment for 2025.
Given these conditions, the 2025 MTBPS could revise its growth forecast closer to the downside scenario, broadly in line with our below-consensus baseline forecast of 1.0% in 2025, 1.3% in 2026, and 1.6% in 2027.
On the inflation front, outcomes have so far surprised to the downside relative to market expectations. Treasury may therefore lower its headline inflation forecasts from 3.7% (2025), 4.2% (2026), and 4.3% (2027) to levels closer to our projections of 3.3%, 3.5%, and 3.3%, respectively. It will be important to monitor how Treasury's forecasts align with the South African Reserve Bank's (SARB's) recently emphasised preference for inflation at the lower end of the 3-6% target range. Markets will be watching closely for any policy guidance from the Minister on this issue. Given its importance in signalling alignment, coordination and providing predictability, the Minister may make a pronouncement at the 2025 MTBPS.
Fiscal performance to date
While economic growth may fall short of the 2025 Budget projections, fiscal revenue outcomes have been mixed, with some categories outperforming expectations while others are underperforming. Gross tax revenue has increased by 9.3% y/y in the fiscal year-to-date (YTD), ahead of the Budget's full-year projection of 7.0%. Among major revenue components (approximately 90% of gross revenue):
Week in review
Private Sector Credit Extension (PSCE) growth rose to 6.0% y/y in September up from 5.9% in August. Household growth remained subdued at 2.9%, slightly lower than the 3.0% recorded previously. In contrast, corporate credit increased to 8.6% in September from 8.3% in August. The main contributors to this growth were general loans and advances, which rose to 13.9% from 13%, vehicle asset finance, which climbed to 9.9% from 8.9%, and credit card advances, which saw a significant jump to 6.7% from 1.2%. In the household segment, changes from August to September were mostly minor. Overdrafts, while still negative, showed a slight improvement, moving from -8.2% in August to -7.2% in September. General loans and advances increased to 0.4%, up from 0.1% in the previous month. Mortgage advances also edged higher, rising to 2.2% compared to 2.1% in August. Households are showing a cyclical recovery; however, monetary policy remains restrictive and ultimately weighing on lending appetite and credit uptake.
Producer inflation increased to 2.3% y/y in September, from 2.1% y/y in August. On a monthly basis, prices decreased by 0.1%, down from 0.3% in the prior month, largely reflecting monthly decreases in meat, fruits and vegetables as well as fuel prices. Excluding petroleum-related products, producer inflation held steady at 2.9% y/y compared to the previous month. Food prices continued to drive headline pressure coming in at 3.8% y/y, down from 4.3% y/y in August. In other categories, significant increases were recorded in furniture and other manufacturing (9.6% y/y from 8.4%). Paper and printed products rebounded with a 0.8% y/y increase, following a 0.5% decline in August. Similarly, coke and petroleum-related products rose by 0.5% in September, recovering from a 1.0% drop the previous month, as annual declines in fuel prices have moderated.
Week ahead
Manufacturing PMI data for October will be released on Monday. The PMI rose by 2.7 points to 52.2 in September, returning to expansionary territory. The 3Q25 average was 5.4 points higher than 2Q25, suggesting an expansion in manufacturing production. An improvement in domestic demand supported this recovery together with stable purchasing prices. That said, manufacturers remained cautiously optimistic about near-term conditions, as trade restrictions and potential dumping weigh on the sector.
Also on Monday, new vehicle sales data for October will be released. Vehicle sales volumes increased by 24.3% y/y in September, reaching 54 700 units. Although part of this can be attributed to the tourism sector, strong demand for entry-level and affordable brands is also providing support. Light commercial vehicles also showed solid growth at 19.7% y/y. Performance in the medium and heavy truck segments was mixed, with medium trucks declining by 1.9%, while heavy trucks increased by 5.9%.
On Thursday, data on electricity generated and available for distribution for September will be released. Electricity production declined by 3.1% y/y in August, following a 2.3% y/y decline in July. The performance for the quarter thus far is negative, suggesting the sector will need to increase production in September to make a positive contribution to GDP growth.
On Friday, data on SA's gross foreign exchange reserves for October will be published. Gross foreign exchange reserves decreased to $69.7 billion in September, from $70.4 billion in August, despite increases in gold reserves and Special Drawing Right (SDR) holdings. The overall decline in external liquidity was due to a $2 billion loan repayment, which offset a $474.6 million loan received on behalf of government, alongside movements in asset prices and foreign exchange swaps conducted for liquidity management.
Tables
