Between 2012 and 2020, National Treasury’s public debt to GDP projections generally under-estimated the medium-term debt profile. The figure below plots the difference between projected debt to GDP ratios to the actual historical estimates from the Treasury’s latest budget. The Treasury’s projections were particularly optimistic about the debt profile in 2018 and 2019. From 2021 onwards, upward revisions to the level of South Africa’s GDP helped to lower the debt profile, leading to large positive forecast errors.
To be fair to Treasury, most forecasters over-estimated growth after the Global Financial Crisis. In a future post, I will compare historical IMF forecast errors to those of the National Treasury. Both the SARB and the IMF have ratcheted down their trend GDP projections over time in response to successive growth disappointments, although the IMF have had a slightly more pessimistic view of the potential growth rate of the economy since the COVID-19 pandemic. We will also be launching a Public Finance Module for our EconData platform later this year that will make it possible to do this type of analysis within minutes.