SA’s fixed income markets welcomed government’s commitment to stick to fiscal prudence in the medium term while directing spending towards areas that will support economic growth. The projection that the government debt to GDP ratio will peak at 77.7% by 2026 is better than the market expected. There was relief at news that although borrowing requirements have risen by about R40 billion above the February national budget estimate, there will be no increase in weekly auction issuances. Bond yields firmed by about 20bps on the day, as the market had priced in significantly worse outcomes. Click here to listen to STANLIB Deputy Head of Fixed Income Sylvester Kobo’s analysis of the Mid-Term Budget Speech from a fixed income perspective.

Credit rating agencies had expected SA’s budget deficit and debt servicing costs to increase, but the pace of deterioration will be a focus. Rating agencies will also focus on the credibility of government’s plan to stabilise finances, given revenue under-collection and the spending overshoot. STANLIB does not expect these agencies will downgrade the country’s already sub-investment grade rating, but the outlook may change from stable to negative. Click here to listen to STANLIB’s Head of Credit: Fixed Income, Tarryn Sankar, discuss the implications of the MTBPS for credit markets.

SA’s fixed income markets welcomed government’s commitment to stick to fiscal prudence in the medium term while directing spending towards areas that will support economic growth. The projection that the government debt to GDP ratio will peak at 77.7% by 2026 is better than the market expected. There was relief at news that although borrowing requirements have risen by about R40 billion above the February national budget estimate, there will be no increase in weekly auction issuances. Bond yields firmed by about 20bps on the day, as the market had priced in significantly worse outcomes. Click here to listen to STANLIB Deputy Head of Fixed Income Sylvester Kobo’s analysis of the Mid-Term Budget Speech from a fixed income perspective.

The Mid-Term Budget Policy Statement (MTBPS) was delivered under difficult economic conditions. The Minister of Finance had to present a consolidated, fiscally-disciplined package to address the deterioration in government finances, but could not make changes that would cause a pushback in an election year. The mini-budget showed tax revenue substantially behind budget, overspending of about R29 billion, mainly because of the wage increase for public servants, and a significant increase in government debt to 77.7% of GDP by 2025/26. The latter will increase the debt servicing cost to 22% of total tax revenue from 18% at present. The minister acknowledged the need to grow the economy and restructure government. However, there are no innovative ideas in this budget and nothing to indicate that government will be able to implement substantial reforms. Listen to further insights from STANLIB Chief Economist, Kevin Lings.

The US economy grew by 4.9% q/q in Q3, beating expectations of 4.5% growth, with strong consumer spending recorded across all segments. This level of economic resilience is unlikely to be sustained – we forecast annual GDP will grow by 2% in 2023 and 1-1.2% in 2024 - but it may imply a need to raise US interest rates further. By contrast, in the euro area, the European Central Bank’s decision to hold interest rates unchanged at 4.5% to rein in inflation is likely to put various economies, including Germany, under significant pressure. Click here to listen to STANLIB’s Chief Economist, Kevin Lings, discuss the trends.

Join our Chief Economist, Kevin Lings, and Head of Multi-Asset, Marius Oberholzer, in a Q&A session where they explore the impact of big macro-economic themes on global financial markets. In this podcast, Kevin and Marius delve deep into how key developments such as interest rates, geopolitics, and potentially a better economic outlook for South Africa in the next two years are affecting investors' decision-making processes.

SA’s September headline inflation rose to 5.4%, largely due to a large increase in the fuel price and a slowdown in the moderation of food inflation. With another fuel price increase expected in October, STANLIB forecasts domestic inflation will rise to 5.5-5.6%. In the US, key areas of the economy are showing resilience, and the Fed is expected to remain watchful until inflation is more fully brought under control. Click here to listen to STANLIB’s Chief Economist, Kevin Lings, discuss the trends.

Despite slight improvement in month-on-month US inflation data for September, the annual rate of inflation remains unchanged and US Federal Reserve officials have given no indication of an early cut in interest rates this year. For more context and details, listen to this week’s Weekly Focus podcast with Kevin Lings, Chief Economist at STANLIB.

In the past week, the US has released a range of data showing an extremely strong labour market, including a surge in job creation in September, which does not imply a cut in interest rates in the near future. However, data on average hourly earnings is moderating, which is more positive. Click here to listen to STANLIB’s Chief Economist, Kevin Lings, discuss the trends.

In this podcast, STANLIB's Chief Economist, Kevin Lings, discusses the R65 billion estimated shortfall in government revenue streams to end-August, based on latest tax collections. The Minister of Finance is expected to explain how government intends to make up the shortfall in his upcoming Medium-Term Budget. Kevin also discusses meaningful progress in controlling euro area consumer inflation, but highlights disparities among different European countries and the dilemma this presents.