JOHANNESBURG – The economy fell into deeper trouble after the national government revenue contracted sharply by 22.8percent year on year in the first four months of fiscal 2020/21.
The SA Reserve Bank (SARB) Quarterly Bulletin yesterday showed that all tax categories underperformed following the restrictions on economic activity.
SARB said total expenditure increased by 2.7percent over this period, yielding a cash book deficit of R260billion, which was R104bn more than a year earlier. It said the national government’s primary deficit of R96.7bn in April to June was more than triple the R29.4bn recorded in the same period in 2019.
“The primary deficit as a ratio of gross domestic product (GDP) of 9percent in the first quarter of fiscal 2020/21 was much higher than the 2.3percent in the same period of the previous fiscal year,” it said.
The decline comes after businesses shut down during the strict lockdown between April and June to curb the spread of the Covid-19 pandemic.
The SA Revenue Service (Sars) said the revenue shortfall was projected at R300bn for the 2020/21 financial year because of the Covid-19 pandemic.
Sars said as many as 30000 companies have been forced to apply for tax directives. It said total gross loan debt of the national government surged to R3442bn as at June 30, representing a notable year-on-year increase of 18.7percent.
The 2020 Budget Review has projected a revised gross loan debt of R3974bn, or 81.8percent of GDP, due to constrained and already deteriorated fiscal space.
The SARB’s Quarterly Bulletin provided further perspective on the state of households, elaborating on the dire second quarter GDP figures which showed a 51percent annualised decline. It said Covid-19 and the lockdown containment measures had an unprecedented effect on already financially constrained households.
SARB said the sharp contraction in household consumption expenditure in the second quarter reflected reduced real outlays on all categories.
The central bank said real gross domestic expenditure shrank for the fourth consecutive quarter in the second quarter, mirroring the contractions in real GDP over this period.
Spending on durable and semi-durable goods contracted the most since these goods were mostly classified as non-essential during the lockdown, with sales prohibited.
The ratio of household debt to disposable income lifted sharply to 85.3percent in the second quarter from 73.6percent while household debt fell for the first time since the third quarter of 2002.
“The outstanding balances of most categories of credit extended to households decreased as the national lockdown and related uncertainty likely affected households’ saving and spending patterns,” the SARB said.
Households’ net wealth, however, increased notably in the second quarter.