Goldman Sachs Group Inc believes South Africa is unlikely to suffer the large revenue shortfall projected by its finance minister and that the nation\u2019s path for fiscal consolidation remains credible.<\/p>\n\n\n\n
Finance Minister Enoch Godongwana painted a bleaker-than-expected picture when he delivered a medium-term budget update last week with a slightly wider deficit. Despite this caution, South Africa remains on track to stabilize debt and bring if below 70% of gross domestic product by the end of the decade, Goldman economist Andrew Matheny said.<\/p>\n\n\n\n
\u201cWe would be surprised if you get the magnitude of revenue shortfall that they\u2019re pointing to,\u201d Matheny said. \u201cWe are more optimistic. If anything, we think they\u2019re probably being overly conservative here.\u201d<\/p>\n\n\n\n
Economists had expected a revenue shortfall of around 12 billion rand ($685 million). Instead, Godongwana announced a 22 billion rand gap, widening the deficit to 5% of GDP from 4.5% projected in February.<\/p>\n\n\n\n
Goldman had seen scope for a possible improvement on South Africa\u2019s sub-investment-grade credit ratings within six months. While it may not happen that soon, a positive outlook remains on the cards, Matheny said.<\/p>\n\n\n\n
Fitch Ratings and Moody\u2019s Ratings may review South Africa\u2019s assessment following the release of the budget update, while S&P Global Ratings\u2019 assessment is due from Nov. 15. All three companies have a sub-investment grade rating on South Africa with a stable outlook.<\/p>\n\n\n\n
\u201cYou don\u2019t narrow that deficit as quickly but this is still a stabilizing debt path versus market consensus and also ratings agency expectations for a more adverse path,\u201d he said, adding that Fitch and S&P, which both rate South Africa BB-minus, are \u201ca little bit behind the curve in terms of calling a bit of a turn in the credit cycle.\u201d<\/p>\n\n\n\n