Test­ing time for Gord­han

Min­is­ter set to tar­get a bud­get deficit of 3.4% of GDP

Weekend Argus (Saturday Edition) - - FRONT PAGE - VUYANI NDABA

SOUTH AFRICA’S lum­ber­ing eco­nomic growth is ex­pected to be Fi­nance Min­is­ter Pravin Gord­han’s main Achilles’ heel when he presents his bud­get on Wed­nes­day ahead of a cru­cial debt rat­ings re­view this year, a Reuters poll found yes­ter­day.

A poll of 15 econ­o­mists taken this week sug­gests Gord­han is ex­pected to tar­get a bud­get deficit of 3.4 per­cent of gross do­mes­tic prod­uct for the year end­ing March 2017 in his bud­get.

Though the gap is slightly nar­rower than the deficit of 3.5 per­cent of GDP sug­gested by the pre­vi­ous poll in Fe­bru­ary, it is still much wider than the Trea­sury’s 3.2 per­cent of GDP pro­jected for the pe­riod in the bud­get ear­lier this year.

The Trea­sury is ex­pected to reach a deficit of 3 per­cent of GDP in the 2017/18 fis­cal year and nar­row to 2.7 per­cent in the fol­low­ing year.

“Low eco­nomic growth could ham­per tax growth and weaken the bud­get deficit,” Emile du Plessis of Fi­no­met­rica said.

A Reuters poll last week sug­gested growth is ex­pected to re­main weak this year, at 0.3 per­cent. The Re­serve Bank has it at 0.4 per­cent and the Trea­sury is ex­pected to cut it from 0.9 per­cent pro­jected in Fe­bru­ary.

“That in­creases the risk of the fis­cal deficit stray­ing from an in­ter­na­tion­ally ac­cept­able level, wider than a deficit of 3 per­cent of GDP,” Colen Gar- row of Mega­nomics said.

The bud­get comes ahead of cru­cial debt rat­ing re­views later this year and amid a probe of Gord­han, who is fac­ing charges of fraud when he ran the tax agency, ac­cu­sa­tions the min­is­ter has said are po­lit­i­cally mo­ti­vated.

A Reuters poll in Au­gust showed the coun­try’s credit rat­ing is set to be cut to junk sta­tus by at least Stan­dard & Poor’s out of the three ma­jor agen­cies, with the probe on Gord­han seen to be fuelling spec­u­la­tion.

Econ­o­mists high­lighted the higher debt ser­vic­ing costs for South African credit in an event of a down­grade.

Fi­no­met­rica’s Du Plessis said what is also im­por­tant is the abil­ity and ded­i­ca­tion of gov­ern­ment de­part­ments to be fru­gal with their bud­gets and to chan­nel ex­pen­di­ture to pro­duc­tive sec­tors. – Reuters

PIC­TURE: DAVID RITCHIE

The bud­get comes ahead of cru­cial debt rat­ing re­views later this year and amid a probe of Fi­nance Min­is­ter Pravin Gord­han

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