Zuma’s new committee to tackle ballooning deficit and moribund growth
A presidential committee will be established to stabilise national debt after the Treasury slashed its growth forecast in half in line with the Reserve Bank‚ the IMF and the World Bank.
The economy is expected to take another beating in 2017‚ with GDP growth revised down to 0.7% from a modest 1.3% projected at the February Budget Review‚ according to the medium-term budget policy statement (MTBPS) presented on Wednesday. Over the medium term‚ GDP growth is expected to increase to a muted 1.9% by 2020.
Economic growth is forecast at 1.1% in 2018 and 1.5% in 2019.
“The economic outlook has deteriorated significantly since the beginning of the year‚” the National Treasury said.
A small team of Cabinet ministers‚ who will report directly to President Jacob Zuma‚ will develop proposals to narrow the deficit‚ stimulate economic growth and build investor confidence.
The revision comes as a result of the recession in the fourth quarter of 2016 and the first quarter of 2017‚ coupled with persistently weak business and consumer confidence‚ which have gathered pace since 2014‚ as well as the credit rating downgrades from Fitch‚ Moody’s and S& P Global Ratings.
It is a far cry from the picture painted by former finance minister Pravin Gordhan in February‚ which showed SA was on a stronger positive growth trajectory‚ but this was offset by the midnight Cabinet reshuffle in March.
The biggest concerns remain around policy and political uncertainty‚ along with weak domestic demand that has weighed heavily on business and consumer confidence‚ deterring investment and job creation.
Further risks include a downgrade of the local currency rating as credit rating agencies are expected to make an announcement in November.
The Treasury said: “Unless decisive action is taken to chart a new course‚ the country could remain caught in a cycle of weak growth‚ mounting government debt‚ shrinking budgets and rising unemployment.
“Much depends on the policy choices made and the effectiveness of their implementation‚” added the Treasury.
The global economy‚ however‚ has continued to improve‚ with growth of 3.6% projected in 2017‚ which is favourable for SA’s growth if the country boosts investment and export competitiveness.
Meanwhile‚ the Treasury assured that the government was committed to transformation and confidence-boosting measures to increase investment guided by the National Development Plan and the 14 measures announced in July this year.