Gordhan's budget will need top-level support
The state of the nation address was full of good intentions but short of new ideas
On a more positive note, Finance Minister Pravin Gordhan will this week deliver his budget speech. It will most probably carry the same message of fiscal consolidation that has been echoed over the past couple of years. But missed targets or signs of reduced commitment to fiscal consolidation will undoubtedly trigger a sovereign downgrade. While the medium-term budget policy statement did enough to avert a downgrade at the end of last year, growth initiatives that render the fiscal adjustment less painful and more sustainable are lacking. The pace of fiscal consolidation is threatened by growth that is below potential and heightened risk to policy execution stemming from wage pressures, infrastructure underspending and exchange rate pressures. So rating agencies could easily downgrade the foreign currency sovereign rating. Uncertainty since the delivery of the medium-term policy statement has intensified. While the consensus is for an improvement in global growth supported by restoc...
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