Government's primary balance—the surplus or deficit before interest rate expenses and one of the most important indicators of fiscal sustainability—showed a steady improvement to -0.3% by early 2017, but had deteriorated rapidly during 2020, reaching -6.1% of GDP by March 2021. By September 2021, this deficit too had eased to 2.3% of GDP. When real interest rates increase relative to the real growth in GDP, it becomes rather important for government to eliminate its primary deficit in order to prevent runaway debt servicing costs and a fiscal debt trap. Therefore, this improvement needs to be sustained.
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