Low Growth Strains South African Budget
By Dow Jones Business News
October 21, 2015, 09:15:00 AM EDT
By Patrick McGroarty
PRETORIA, South Africa--South Africa's treasury again deferred plans to narrow its budget Wednesday, citing global economic turmoil and protected domestic weakness for a tough financial outlook.
In an annual update on the fiscal year that runs through February, South Africa's treasury said it would post a 3.8% deficit on its $102 million federal budget, a slight improvement from the 3.9% gap forecast earlier this year.
But growth of just 1.5% will prevent the treasury from tightening that gap as much as planned in the years ahead. The deficit is now forecast to remain at 3.0% of gross domestic product in the fiscal year running into 2019, rather than narrowing to 2.5% by 2018 as previously planned.
"We must be frank about the touch domestic challenges that must be overcome," Finance Minister Nhlanhla Nene told reporters.
The treasury also bumped back the date at which it plans for South Africa's gross debt to peak, at 45.7% of gross GDP, from 2018 to 2020.
"South Africa needs to reconstruct a social consensus behind a path of accelerated economic growth," the treasury wrote, citing power shortages and frequent strikes as two of the main drags on Africa's second-largest and most developed economy.
In their report, treasury officials were frank about the consequences if South Africa doesn't rise to the challenge.
"Without a stronger effort to overcome domestic constraints and speed up the pace of structural change, South Africa will not be able to substantially reduce unemployment, poverty and inequality," the report said.
The treasury said South Africa's unemployment rate, including people too discouraged to keep looking for work, was about a third of the workforce. At the same time, South Africa's 1.3 million public servants recently received a 10.1% raise that the treasury said would put a great strain on its ability to provide new services to the disadvantaged.
"Without commensurate improvements in the quality of public services, such increases are not sustainable," the treasury said.
Write to Patrick McGroarty at [email protected]
October 21, 2015, 09:15:00 AM EDT
By Patrick McGroarty
PRETORIA, South Africa--South Africa's treasury again deferred plans to narrow its budget Wednesday, citing global economic turmoil and protected domestic weakness for a tough financial outlook.
In an annual update on the fiscal year that runs through February, South Africa's treasury said it would post a 3.8% deficit on its $102 million federal budget, a slight improvement from the 3.9% gap forecast earlier this year.
But growth of just 1.5% will prevent the treasury from tightening that gap as much as planned in the years ahead. The deficit is now forecast to remain at 3.0% of gross domestic product in the fiscal year running into 2019, rather than narrowing to 2.5% by 2018 as previously planned.
"We must be frank about the touch domestic challenges that must be overcome," Finance Minister Nhlanhla Nene told reporters.
The treasury also bumped back the date at which it plans for South Africa's gross debt to peak, at 45.7% of gross GDP, from 2018 to 2020.
"South Africa needs to reconstruct a social consensus behind a path of accelerated economic growth," the treasury wrote, citing power shortages and frequent strikes as two of the main drags on Africa's second-largest and most developed economy.
In their report, treasury officials were frank about the consequences if South Africa doesn't rise to the challenge.
"Without a stronger effort to overcome domestic constraints and speed up the pace of structural change, South Africa will not be able to substantially reduce unemployment, poverty and inequality," the report said.
The treasury said South Africa's unemployment rate, including people too discouraged to keep looking for work, was about a third of the workforce. At the same time, South Africa's 1.3 million public servants recently received a 10.1% raise that the treasury said would put a great strain on its ability to provide new services to the disadvantaged.
"Without commensurate improvements in the quality of public services, such increases are not sustainable," the treasury said.
Write to Patrick McGroarty at [email protected]
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