Johannesburg - The Absa economic desk has said on 30 January 2023, the National Treasury published encouraging fiscal data for the main budget in December, showing the main budget posting a surplus of R45bn, with broad-based strength in tax collections, in line with its forecast based on the provisional financing data.

The banking group said personal income taxes posted another strong month of gains, while corporate income tax receipts remained elevated, coming in 4% higher than a year earlier, despite the fall in commodity export prices since then. For April to December, the cumulative deficit is now 16.4% lower than the same period a year earlier, versus an MTBPS forecast of an unchanged deficit in FY22/23 from FY21/22, it said.

"While this might suggest some risk that the main budget deficit this year could undershoot the MTBPS target of 4.9% of GDP, some caution is warranted given that consumption-related taxes and corporate profitability are likely to have been hard hit by load shedding. Nonetheless, we now forecast a main budget deficit outcome for the current fiscal year of 4.6% of GDP, versus the MTBPS forecast of 4.9% of GDP and our previous forecast of 5.0% of GDP. See South Africa: Robust tax receipts in December point to a deficit undershoot (31 January 2023) for more details," Absa said.

However, the bank said the December private sector credit extension came in weaker than expected, with PSCE growth slowing to 7.7% y/y, down from 8.3% in November. This was softer than its forecast (+8.5%) and the Thomson Reuters consensus (8.2%). However, the headline PSCE print masks divergence between lending to households and corporates, it explained, adding that corporate credit extension slowed markedly to 7.7% y/y in December from 9.0% y/y in November and was the main driver of the weaker overall PSCE print. Meanwhile, despite higher interest rates, household credit continued to pick up, rising 7.7% y/y in December after growth of 7.4% in November.

The IMF upwardly revised its global and South Africa GDP growth forecasts for 2023. In its latest World Economic Outlook titled Inflation Peaking amid Low Growth, the IMF forecasts that global GDP growth will ease from 3.4% in 2022 to 2.9% in 2023 (upwardly revised by 0.2pp compared with the October WEO outlook) and come in at 3.1% in 2024 (downwardly revised by 0.1pp). Although the IMF said that the recent reopening in China 'has paved the way for a faster-than-expected recovery', it sees the balance of risks to the global growth outlook as titled to the downside. The IMF forecasts that global inflation will slow from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024 partly due to declining international fuel and non-fuel commodity prices and 'the cooling effects of monetary policy tightening on underlying (core) inflation'. These global inflation forecasts were upwardly revised by 0.1pp for 2023 and 0.2pp for 2024.

Meanwhile, the IMF forecasts that GDP growth in South Africa will fall from an estimated 2.6% in 2022 to 1.2% this year (upwardly revised by 0.1pp) and 1.3% next year (unchanged). South Africa's GDP growth is expected to deteriorate this year mainly due to power shortages, weaker external demand and structural constraints. The IMF's growth outlook for South Africa was likely largely fixed before January 2023 proved to be the worst month of load shedding. Therefore, we believe that risks to their GDP growth forecast and ours (see Figure 16) for 2023 lie on the downside. A more up-to-date forecast by the SARB last week pencilled in GDP growth of 0.3% for this year.

Absa said it forecasts that the intense load shedding in December weighed on exports and by extension the merchandise trade surplus. Today at 14:00 local time, SARS will publish the merchandise trade balance data for December, and the bank forecast that the surplus narrowed to R5.5bn (in line with the Thomson Reuters consensus) from R8.0bn in November.

"We believe that the surplus narrowed due to the rand value of exports falling 1.5% m/m owing to the intense load shedding and the ongoing problems at Transnet's freight rail, despite the fact that its force majeure ended in November. Meanwhile, we believe that imports were broadly unchanged, falling 0.1% m/m in December. That said, this release will be important for our forecast Q4 22 current account balance as a % of GDP," it concluded.