SA’s economic growth revised down to 1.5%

Wednesday, October 21, 2015

Pretoria - National Treasury has revised downwards South Africa’s economic growth to 1.5%.

“The Medium Term Budget Policy Statement [MTBPS] projection is that the economy will grow by about 1.5% this year, rising marginally to 1.7% next year,” said Finance Minister Nhlanhla Nene on Wednesday.

In the February budget, Treasury had projected growth of 2% for 2015.

“This is considerably lower than at the time of the February budget when we envisaged 2% this year and 2.4% in 2016. The International Monetary Fund also projects a decline in growth next year,” explained the Minster as he tabled the 2015 MTBPS in Parliament.

Falling commodity prices and electricity supply constraints and lower confidence levels have resulted in growth forecasts being revised lower.

Investment growth is projected to be at 1.2% this year with limited employment growth and household income constraints holding back consumption.

Briefing Parliamentarians, the Minister said that exports have grown strongly in 2015, which is a welcome recovery after setbacks in mining and manufacturing last year.

“Although exports have grown faster than imports since 2012, the current account deficit on the balance of payments is still a sizeable 4.1 % of gross domestic product this year,” said the Minister.

Consumer Price Inflation (CPI) has declined from 6.1% in 2014 to a projected 4.8% this year. Higher food prices and the weakening of the rand are expected to contribute to a rebound inflation to around 6% a year over the period ahead.

Investment

According to the MTBPS document, the macroeconomic approach of the NDP includes sustaining high levels of public investment, increasing private investment and reducing consumption.

The plan identifies export growth and maintaining a real competitive exchange rate as important drivers of economic output and job creation.

According to the document, the public sector has sustained high levels of investment, with over R800 billion of infrastructure spending projected over the medium term in energy, transport and social infrastructure.

It further stated that government recognises that national development requires expanded partnerships with the private sector.

“For example, a greater role for private finance as a complement to public funds in social provision will also be explored in the housing, tertiary education and health sectors,” said the document.

Government is also working to strengthen policy certainty. Cabinet has decided that all future legislation and regulations will be subject to a socioeconomic impact assessment to mitigate unintended consequences.

In response to a question of the private sector not being able to invest because of the slow roll-out of the government’s infrastructure programme, Minister Nene said these issues need to be dealt with.

“The concerns range from some of the bottlenecks … and also of the nature of our investment programmes ... It is for that reason that we’re saying we need a dialogue between the private sector and government.  A number of instances where we’ve had such, we’ve seen progress.

“We’ve reached a point where we need to be specific on issues of where the private sector sees red-tape and bottlenecks and those can be dealt with,” explained the Minister at a media briefing ahead of the tabling of the mini-budget.

Revenue

Meanwhile, National Treasury adjusted downward revenue estimates as a result of the slowdown in economic activity. Gross tax revenue has been revised down by R6.7 billion in 2015 and by R35 billion over the three-year period.

“Revenue has nonetheless held up well since the 2008/09 recession. This signals both the resilience of our tax policy framework and continued strength of tax administration,” said the Minister.

Over the medium term, government will continue to explore reforms that promote an efficient and progressive tax system.

“I have asked for further advice on wealth taxes,” said the Minister. -   SAnews.gov.za

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