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<\/a><\/p>\nFiscal problems<\/strong><\/p>\n The fiscal situation is a second threat to the economy, along several dimensions, the SARB said.<\/p>\n Over the past decade, South Africa has added more debt, relative to GDP, than any top 20 emerging market, except Argentina, it said.<\/p>\n Forecasts indicate that South Africa will also be growing debt by more than any of these countries over the next two years – although forecasts for Argentina are not available.<\/p>\n “While the 2009 starting point for debt was low, at less than 30% of GDP, a decade of debt accumulation has raised that number to 63.5% as of 2019\/20, which is likely to become 81.8% this year, pushing South Africa well above the broad emerging market average of 63.1% according to the IMF.<\/p>\n “While efforts were made to contain this debt growth, these initiatives relied more heavily on tax increases than spending cuts, with minimal contributions from reform initiatives.”<\/p>\n Meanwhile, high debt levels are likely to affect the recovery through several channels, the central bank said.<\/p>\n “These include confidence effects and uncertainty, inasmuch as debt sustainability is in doubt, as well as crowding out via high long-term interest rates, a lower country credit rating, and reduced access to foreign savings.<\/p>\n “The major supports to growth are record-low short-term interest rates and extensive opportunities for structural reforms.”<\/p>\n
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