Last week, US President Trump signed legislation to end the US government shutdown, while locally, finance Minister Enoch Godongwana tabled the 2025 MTBPS, preserving the crucial debt-to-GDP peak at 77.9% this year while adopting a 3% inflation target and reinforcing fiscal consolidation. SA’s sovereign credit rating was upgraded by S&P.
International Market Developments
President Trump signed legislation to end the US government shutdown. However, the release of the October CPI will be delayed, and may not be published at all. It could take several days or even weeks for government operations to fully resume and clear the backlog that has accumulated since the shutdown began on 1 October. Statistical agencies and other government departments are gradually resuming operations after President Trump signed a law late Wednesday to restore funding.
Ahead this week, the US FOMC will release the minutes from its 28–29 October meeting on Wednesday, a meeting at which Fed Chair Jerome Powell had struck an unusually hawkish tone. Fed policymakers speeches over the last week have raised scepticism about the need for another cut at the 9–10 December FOMC meeting. Markets have slashed the probability of a cut at the December meeting from approximately 70% right after the November meeting to currently less than 25%. There has been a regime change over the last month as markets have shifted from “how many cuts in 2025?” to “will they cut at all in 2026 if inflation stays sticky”.
Local Market Developments
Finance Minister Enoch Godongwana’s 2025 Medium-Term Budget Policy Statement kept the critical debt-to-GDP peak at 77.9% this fiscal year despite adopting a lower 3% inflation target. National Treasury reaffirmed its commitment to fiscal consolidation despite formally adopting a lower 3% inflation target (with a ±1% tolerance band), which slightly raises the near-term debt ratio due to weaker nominal GDP growth.
The main budget deficit narrows from 4.7% of GDP currently to 2.9% by FY28/29, with the primary surplus rising to 2.5%. Revenue this year was raised by nearly R20 billion, spending increases to R2.588 trillion in FY25/26, and R15.8 billion is added now for priorities and infrastructure. Real GDP growth is revised down to 1.2% for 2025, averaging 1.8% medium-term. Crucially, debt-service costs will grow by only 3.8% annually—half the February forecast. By anchoring debt stabilisation and boosting the primary surplus, the MTBPS reinforces fiscal discipline and reform commitment.
S&P raised South Africa’s sovereign credit rating Foreign Currency to BB from BB- and the Local Currency rating to BB+ from BB with a positive outlook. Progress in sustaining a primary budget surplus for a third consecutive year, along with improvements in tax collections and expenditure constraints, supports fiscal consolidation through to FY28. The positive outlook suggests potential for further improvement if the GNU adheres to its path of fiscal consolidation, as well as the possibility of stronger growth than S&P currently expects. Regarding reforms, S&P noted the progress made in electricity supply and Eskom’s posting of profits for the first time in eight years. However, municipalities continue to present significant risks to service delivery and face ongoing financial constraints.
The SARB will meet this week on Thursday and is widely expected to cut the repo rate by 25 bps, to 6.75%.