What economists expect of South Africa’s projected deficit
Economists doubt Malusi Gigaba has a plan to avoid a local currency credit rating downgrade by mid-2018
Ahead of Finance Minister Malusi Gigaba’s maiden medium-term budget, most economists are predicting the projected deficit will jump from the 3% range to over 4%, on a revenue shortfall that could be anything from R33bn to R60bn. The question is what, if anything, he will do by way of tax hikes or spending cuts to get the deficit back on track over the next three years of the medium-term framework. Some expect the budget will be little more than a holding statement, in which Gigaba will reaffirm the government’s commitment to fiscal consolidation, promising tax hikes and spending cuts to be detailed in the main budget in February. However, economists are sceptical that he will be willing or politically able to do enough, making a downgrade of SA’s local currency rating likely by June 2018 at the latest. "It is not clear that the finance minister has a plan," Investec Asset Management’s Nazmeera Moola said. "Without a clear indication of stabilisation in the debt-to-GDP ratio, SA’s ra...
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