Don’t compare apples with oranges when assessing Mboweni’s budget
Gilad Isaacs uses fiscal multipliers calculated under different conditions to motivate for more government spending
When it emerges from the unprecedented shock of the Covid-19 lockdown, SA’s macroeconomic health will be measured by the growth rate of potential output and how well aggregate demand keeps actual output growth near the economy’s potential.
A wide range of risks are involved in how domestic and global events and chosen policies shape growth outcomes. Finance minister Tito Mboweni’s supplementary budget highlighted the risk of a rising debt-to-GDP ratio increasing further the public resources consumed by interest payments. Given the many economic, social and political uncertainties facing the post-Covid world, SA faces the additional possibility that the flows of capital that have financed spending up to now will become more volatile, with sudden net outflows squeezing South Africans’ economic welfare...
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