ANALYSIS: A brief history of budgetary optimism
Treasury consistently overestimates economic growth rates, and almost always offers rosier projections than the Reserve Bank and IMF, writes Tamar Kahn
The Treasury says it expects the economy to expand by just 0.5% in 2016 and improve to 1.3% in 2017, projections that remain unchanged since last October’s medium-term budget policy statement but are more optimistic than the predictions of economists and the IMF. Since 2012, the economy has grown far more slowly than Treasury’s projections, data compiled by Business Day shows. For example, in the 2012 budget the Treasury forecast real GDP growth for the 2014 fiscal year would be 4.2%. A year later it forecast it would be 3.5%, and in the 2014 February budget it predicted it would be 2.7%. The actual figure for real economic growth for 2014 came in at 1.5%. The Treasury itself conceded in the 2016 budget review that its outer year forecasts had proven overly optimistic. The Treasury’s projections also look optimistic compared with a survey of 22 economists polled by Bloomberg News earlier in February, which predicted the economy would expand just 0.4% in 2016 and 1.2% in 2017, as the...
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