South Africa President Cyril Ramaphosa
South Africa said on Wednesday it had halved it growth forecast to 0.7 per cent after its budget deficit estimates widened, due to a recession and revenue shortfalls.
Finance Minister Tito Mboweni made the disclosure in a medium term budget policy speech to parliament in Cape Town.
Mboweni said that spending on infrastructure, manufacturing and agriculture would boost growth.
South Africa’s economy is currently struggling with ballooning debt that risk pushing the sovereign’s credit ratings deeper into “junk” territory.
Mboweni said the budget deficit estimate for the 2018/19 fiscal year was seen widening to four per cent of GDP from 3.6 per cent previously.
“The budget deficit is seen rising to 4.2 per cent in the next two years,” he said.
He added that in the three years to 2020/21, the tax revenue was expected to underperform significantly.
South Africa’s fiscal year runs from April to March.
The rand, which was half a per cent stronger before the budget speech was read out by Mboweni, turned weaker, falling 1 per cent. Government bonds also fell.
The treasury said in a statement that fiscal risks remained elevated over the medium term, adding that at a minimum, economic growth of 2.5 to 3 per cent was required to sustain current public spending commitment.
President Cyril Ramaphosa last month announced a stimulus plan that included 50 billion rand ($3.5 billion) of expenditure, a portion of which will be funds shifted from low performance areas.
The treasury said it would shift 32.4 billion rand in expenditure over the next three years, with nearly half the amount directed to agriculture, infrastructure, clothing and textile incentives and job creation programmes. (Reuters/NAN)
