SA faces R70 billion revenue shortfall
Johannesburg – South Africa is facing an estimated R70 billion revenue shortfall and has had to borrow to finance its Medium- Term Budget Policy. The MTBPS maps out government spending and revenue plans over the next three years. But the government can take heart as the country’s leading business cycle indicator has risen for the fifth month running, boosting expectations that the economy will emerge from recession in the fourth quarter.
Business Day reported on Tuesday that the composite leading indicator climbed a robust 2,1 percent in August to 112,5 from 110,1 in July, although the level is still 3,5 percent below the 116,6 reported in August last year. The indicator — compiled by the South African Reserve Bank with data from surveys, share prices and SA’s main trading partners — predicts trends in the economy in the next six to 12 months.
“The leading indicator is approaching levels experienced in the third quarter of 2008, but what is particularly key is that it is showing a strong, positive trend which underscores our expectation that the SA economy will be out of recession in the fourth quarter of 2009,” Investec group economist Annabel Bishop was quoted as saying. Absa Capital economist Jeff Schultz said the economy could have emerged from recession as early as September or this month.
He predicted third-quarter gross domestic product (GDP) growth at zero and that it would rise to 2,3 percent in the fourth quarter. Growth “will be slow”, with year-on-year GDP growth next year likely to be relatively low at 2,3 percent. Bishop expected growth of 0,2 percent in the fourth quarter and 2,4 percent in the first quarter of next year with year-on-year growth next year expected to be 1,6 percent. However, “the economic recovery is expected to be slow and not necessarily steady, further company losses can be expected and revenue collections will be below historic levels in the next fiscal year as well”, she said.
Budget deficits are rising globally as governments assist ailing companies to limit systemic financial crises. Economi s t s expe c t government expenditure growth to be similar to that budgeted at 16,2 percent year on year, due to a rising wage bill, the creation of new departments and more spending on social services.