Mboweni to deliver budget with very little breathing room

By Janice Roberts
Editor
Finance Minister Tito Mboweni

Finance  Minister  Tito  Mboweni  is  set  to  deliver  a  budget  with  very  little  breathing  room  on  Wednesday  26  February, the Nedbank Group Economic Unit says.

Further  downward  revisions  are  likely  to  National  Treasury’s  economic growth forecasts, given the resumption of load‐shedding for an extended, yet undefined, period, the damage done to confidence and service delivery through years of government misspending, inertia and  widespread  corruption  as  well  as  mounting  pressures  on  company  profits  and  household finances.

“This leaves the Finance Minister and National Treasury in the unenviable position of finding some acceptable compromise between visibly advancing fiscal consolidation while also maintaining essential services in the face of increased unemployment and rising dependency,” Nedbank states.

The key to improving both fiscal  and  economic  prospects  is  to  deregulate  the  electricity  sector  and  implement  other essential structural reforms, it adds.

The budget deficit for 2019/20 is forecast to be about 6,2% of GDP, substantially worse than the 2019 National Budget’s estimate of 4,5% and the upwardly revised  5,9% estimate of  the Medium Term Budget Policy Statement (MTBPS). “The outcome reflects the impact of significant revenue shortfalls, due to much weaker than expected economic growth, and sharply higher expenditure, caused by the additional bailout of Eskom, SAA and other loss‐making SOEs.”

Nedbank believes that National Treasury will  probably  set  the  budget  deficits  for  2020/21 and  2021/22 at  slightly  higher levels than the 6,5% and 6,2% of GDP reflected in the MTBPS. “Our forecasts are for around 6,8% and 6,5% respectively.  Meaningful consolidation is again expected to be postponed until the final year of the budgeting period.”

Little tax relief is expected.  Personal, company and VAT tax rates are expected to remain unchanged and adjustments to tax thresholds will not fully compensate for inflation. 

 

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