This will be an important week for South Africa as the Minister of Finance will table the Medium Term Budget Policy Statement (MTBPS) and inflation and retail sales data are also scheduled for release‚ FNB says in its weekly economics report.
According to FNB economists Alex Smith and Mamello Matikinca‚ the MTBPS – often referred to as the mini budget — will be even more important than usual because SA’s sovereign credit rating has come under pressure in recent years‚ placing a keen focus on National Treasury and its ability to meet budget targets.
In February’s National Budget‚ they note‚ Treasury set a GDP growth forecast of 2% in 2015 and 2.4% in 2016. Since then the economy has deteriorated to the extent that FNB currently forecasts growth of 1.4% and 1.2% this year and next.
“This growth underperformance points to a heightened risk that tax receipts will come in lower than expected.
“Nevertheless‚ we believe that National Treasury is committed to meeting its budget deficit targets. Therefore if a tax undershoot is expected by Treasury‚ we think that it will announce measures to reduce spending and/or raise tax rates.
“Whilst the specific measures will probably only be announced in next year’s main Budget‚ we can expect them to be alluded to in the MTBPS‚” the FNB economists state.
SA’s headline inflation rate‚ they say‚ is expected to have increased marginally to 4.7% y/y in September‚ from 4.6% in August.
“This will be driven by a rise in food and non-alcoholic beverages inflation. Meanwhile‚ lower transport and clothing inflation should help to keep the headline increase muted.”
Retail sales increased at a solid rate of 3.3% y/y in July and 3.8% y/y in June of this year and one could be forgiven for thinking that the retail sector is in a good space at present‚ the economists say.
However‚ they point out that these strong increases largely reflect base effects as low readings were recorded in the middle of last year due to widespread labour unrest.
“With the base having normalised in August‚ we expect a weaker retail sales gain in the order of 1% y/y‚” the economists add.
MTBPS to indicate whether Treasury meeting targets
This will be an important week for South Africa as the Minister of Finance will table the Medium Term Budget Policy Statement (MTBPS) and inflation and retail sales data are also scheduled for release‚ FNB says in its weekly economics report.
According to FNB economists Alex Smith and Mamello Matikinca‚ the MTBPS – often referred to as the mini budget — will be even more important than usual because SA’s sovereign credit rating has come under pressure in recent years‚ placing a keen focus on National Treasury and its ability to meet budget targets.
In February’s National Budget‚ they note‚ Treasury set a GDP growth forecast of 2% in 2015 and 2.4% in 2016. Since then the economy has deteriorated to the extent that FNB currently forecasts growth of 1.4% and 1.2% this year and next.
“This growth underperformance points to a heightened risk that tax receipts will come in lower than expected.
“Nevertheless‚ we believe that National Treasury is committed to meeting its budget deficit targets. Therefore if a tax undershoot is expected by Treasury‚ we think that it will announce measures to reduce spending and/or raise tax rates.
“Whilst the specific measures will probably only be announced in next year’s main Budget‚ we can expect them to be alluded to in the MTBPS‚” the FNB economists state.
SA’s headline inflation rate‚ they say‚ is expected to have increased marginally to 4.7% y/y in September‚ from 4.6% in August.
“This will be driven by a rise in food and non-alcoholic beverages inflation. Meanwhile‚ lower transport and clothing inflation should help to keep the headline increase muted.”
Retail sales increased at a solid rate of 3.3% y/y in July and 3.8% y/y in June of this year and one could be forgiven for thinking that the retail sector is in a good space at present‚ the economists say.
However‚ they point out that these strong increases largely reflect base effects as low readings were recorded in the middle of last year due to widespread labour unrest.
“With the base having normalised in August‚ we expect a weaker retail sales gain in the order of 1% y/y‚” the economists add.
Would you like to comment on this article?
Register (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Trending
Latest Videos