Looking ahead: Investec economist Kamilla Kaplan says the budget deficit should compress further from 4% thanks partly to benign inflation and expected revenue and expenditure measures. Picture: SUPPLIED
Looking ahead: Investec economist Kamilla Kaplan says the budget deficit should compress further from 4% thanks partly to benign inflation and expected revenue and expenditure measures. Picture: SUPPLIED

The Treasury’s integrity and the government’s commitment to slash spending in the 2018 budget will come under scrutiny this week, which could be make or break for SA hanging on to its last investment-grade rating.

Statistics SA inflation data will also play a cameo role.

The budget, which will be tabled in Parliament on Wednesday, is expected to be a juggling act between painful tax hikes, deep cuts in the public sector and last-minute demands from the remnants of Jacob Zuma’s administration.

Investors, sovereign credit ratings agencies and society will keenly observe the integrity of plans to close a R50.8bn tax revenue shortfall for the year that could expand in the next two financial years.

The budget deficit, the difference between expenditure and revenue, was nevertheless expected to compress further from 4% after this financial year, thanks partly to benign inflation and expected revenue and expenditure-side measures, Investec economist Kamilla Kaplan said.

Inflation, also out on Wednesday, is projected to have eased to 4.4% year on year in January from December’s 4.7%, according to NKC Economics. Nine economists surveyed by Bloomberg forecast the same.

The Nedbank Group Economic Unit expected inflation to be 4.5%, economist Johannes Khosa said.

Elize Kruger, NKC African Economics senior economist, said lower fuel prices in January would have contributed to softer inflation. But this might be partially offset by a projected rise in food inflation.

"January is historically a high food price month."

Inflation and budget information will be preceded by December data for tourist accommodation, land-transport survey and food and beverages on Monday. Another significant data print is the Reserve Bank’s December leading indicator, a gauge of trends in the economy, which comes out on Tuesday.

speckmana@businesslive.co.za

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