Today’s post by Jurgens Fourie compares Codera’s estimates of South Africa’s cyclically adjusted budget balance to those of the IMF. These estimates provide a clearer picture of a government’s underlying fiscal position by removing the temporary effects of the business cycle. Both sets of estimates show that South Africa has been running structural fiscal deficits between the global financial crisis and the pandemic. This suggests underlying fiscal imbalances were not merely temporary and that policy adjustments would have been needed to ensure long-term sustainability. The differences in these estimates owe to different assumptions about potential output and fiscal elasticities.
Note that these estimates are based on a slightly different approach than our earlier posts on cyclically adjusted budget balances
