Understanding fiscal slippage and fiscal forecast errors in South Africa

South Africa has seen public debt rise despite consistently projecting debt stabilization over the medium term. This paper presents a fiscal forecast analysis assessing the contributing factors for this fiscal slippage. We show that fiscal slippage reflects unexpected macroeconomic shocks and large, persistent budget deficits. The National Treasury was consistently surprised by the structural slowdown in economic growth that characterized the period since the global financial crisis of 2008/09. However, the National Treasury’s macroeconomic forecast accuracy was similar to that of the South African Reserve Bank, the International Monetary Fund, and the private sector. Regarding fiscal forecasts, we demonstrate that the accuracy of the National Treasury’s projections has been broadly comparable to those of the International Monetary Fund when expressed relative to gross domestic product. The paper highlights the importance of raising the structural rate of economic growth in South Africa and the pressure that unplanned expenditures place on the fiscal framework.