Economists expect stable Budget with no major tax changes as revenue windfall eases pressure

Finance Minister Enoch Godongwana is expected to deliver a measured and disciplined 2026 National Budget Review next week, with leading economists forecasting a “hold-the-line” approach that avoids major tax shocks while reinforcing fiscal consolidation.

Analysts from PwC, PSG Financial Services, Citadel, and Stellenbosch Business School on Tuesday broadly agreed that this year’s Budget is unlikely to contain dramatic policy shifts.

Instead, they said it is expected to reflect incremental improvements in the fiscal outlook, supported by stronger-than-anticipated tax collections and a firmer primary surplus.

“The environment in which this year’s National Budget Speech is being presented is significantly improved compared to 2025. The commodity cycle, especially the strong performance of gold and platinum, has provided a considerable fiscal windfall, creating a more favourable backdrop for this year’s budget,” said Citadel chief economist, Maarten Ackerman.

“We are also seeing early signs of more diversified domestic growth, with notable improvements in energy, logistics and tourism. This should support the budget’s growth assumptions.”

PwC anticipates Budget 2026 will provide clarity on how geopolitical risks, including US tariff pressures, Agoa uncertainty, and global trade tensions, will be factored into policy planning, alongside continued progress on structural reforms in energy and logistics.

Lullu Krugel, PwC South Africa’s chief economist, said they were expecting real gross domestic product (GDP) growth of 1.2% in 2026, edging up to 1.3% in 2027 and 1.5% in 2028.

Nominal GDP growth, which includes inflation, is forecast at 5.3% in 2026, rising gradually over the medium term. However, Krugell cautioned that much of the expansion reflects price pressures rather than robust real output gains.

“We predict continued restraint on the public sector wage bill, with the government's early retirement programme targeting 2,200 SANDF members and broader payroll reforms. We expect infrastructure investment to remain a priority, with the R15 billion infrastructure bond issuance proceeding,” said Krugel.

“South Africa's debt burden remains elevated at 77.9% of GDP. We anticipate that the NT will confirm the debt stabilisation achieved in FY2025/26, articulate a clear path to reducing the debt ratio towards 70% in the medium term and 60% in the long term, and provide an update on the fiscal anchor policy expected to take effect from April 2027.”

PwC expects the consolidated budget deficit to narrow more gradually than Treasury projected in the 2025 Medium-Term Budget Policy Statement (MTBPS), but still trend lower over the medium term. 

Mining taxes have been buoyed by elevated precious metals prices, particularly gold and platinum group metals, lifting corporate income tax collections, pointing to a meaningful revenue overrun in 2025/26.

Johann Els, chief economist at PSG Financial Services, argued that the key story of Budget 2026 is revenue outperformance rather than austerity.

“My central view is that Budget 2026 will be relatively boring — and that’s exactly why it could be good news,” Els said.

"The 2025/26 outcome is likely to be materially better than the original targets, driven mainly by revenue over-performance rather than spending cuts. That reduces the need for unpleasant surprises. No major tax hikes. No emergency measures. Probably just the usual fuel levy and sin taxes."

If realised, Els said, this would strengthen prospects for stabilising South Africa’s debt burden and potentially bring forward the timeline for a gradual decline in the debt ratio.

However, analysts caution that bracket creep, the failure to fully adjust tax brackets for inflation, could effectively raise the tax burden on middle-income earners without headline rate increases.

Prof André Roux of Stellenbosch Business School expects the Social Relief of Distress grant to be extended for another year, possibly with a modest increase, but views proposals for a universal income grant as unaffordable at this stage.

However, Roux said the local government elections lying ahead make any major tax or expenditure changes unlikely, while low growth expectations inhibit organic growth in tax revenue, although the high gold price should deliver a small corporate tax revenue windfall. 

“All in all, no major surprises are expected. For the time being, given the looming local elections, the contentious VAT rate will probably remain unchanged (although all bets are off regarding next year). Nor is the Minister expected to adjust personal income tax rates – at least not visibly,” he said.  

“By again not making a full adjustment for bracket-creep the Minister may covertly subject personal income taxpayers – especially those in the middle-income bracket – to an effectively higher burden.”

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