{"id":443338,"date":"2020-10-26T09:38:13","date_gmt":"2020-10-26T07:38:13","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=443338"},"modified":"2020-10-26T09:56:49","modified_gmt":"2020-10-26T07:56:49","slug":"the-big-hitch-in-mbowenis-budget-plans","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/443338\/the-big-hitch-in-mbowenis-budget-plans\/","title":{"rendered":"The big hitch in Mboweni’s budget plans"},"content":{"rendered":"

With domestic financial markets likely to be swept along by the US election in early November, South African-specific events are back in focus this week, with the tabling of the Medium Term Budget Policy Statement (MTBPS) likely to dominate proceedings.<\/p>\n

The market will look to the MTBPS to provide a more in-depth prognosis of South Africa\u2019s post Covid-19 fiscal trajectory, including the spending and funding requirements of government\u2019s recently announced economic recovery plan.<\/p>\n

The Bureau for Economic Research (BER) said that particular focus will be placed on the extent to which Treasury sticks with the \u2018active\u2019 scenario outlined in June.<\/p>\n

“(The June plan) stabilises government debt at about 87% of GDP by 2023\/24 – (this) will be scrutinised for implementation potential and therefore credibility,” it said.<\/p>\n

The BER said that greater detail on the medium-term expenditure and tax measures to achieve the active scenario will be welcome. In terms of the much-talked about tax plans<\/a> – while tax announcements will most likely be left to the main budget in February 2021, the MTBPS may provide some hints, it said.<\/p>\n

“Crucial will be whether Treasury sticks to the aggressive spending cuts from 2021\/22 onwards that were outlined in the June supplementary budget.<\/p>\n

“Subsequent to the June budget statement, there was a lot of scepticism on whether, relative to the 2019 MTBPS baseline, cuts in excess of R350 billion between 2020\/21 and 2022\/23 were feasible, or even desirable.”<\/p>\n

The BER said that it shares these doubts, citing president Cyril Ramaphosa\u2019s economic advisory council which proposes a more gradual approach to spending cuts in order to give the economy some breathing space to recover from the Covid-19 crash.<\/p>\n

By comparison, based on recent academic studies, senior Treasury officials have argued that in recent times, the fiscal multiplier – the change in GDP in response to a change in government spending – has in fact been quite low in South Africa.<\/p>\n

\u201cTherefore, large expenditure cutbacks may not have an overly adverse GDP impact. The adverse GDP impact could also be reduced if the composition of spending can be improved with a larger focus on capital as opposed to outlays on current expenditure.<\/p>\n

\u201cAgainst this backdrop, we think Treasury is likely to largely stick to their guns on proposing aggressive expenditure constraint (with a better composition) from 2021\/22 onwards.\u201d<\/p>\n

However, additional expenditure demands relating to SAA and financing Ramaphosa\u2019s economic recovery plan, as well as a weaker real GDP outlook for 2020 than Treasury assumed in June, suggest that the starting point for the budget deficit may be even weaker than expected before<\/strong>, said the BER.<\/p>\n

With this in mind, the group expects sizeable main budget deficits of 14.9, 10.8 and 9.3% for 2020\/21 through 2022\/23.<\/p>\n

This results in the debt-to-GDP-ratio rising to more than 88% in 2022\/23 – a weaker outlook than Treasury\u2019s June active scenario.<\/p>\n

\n

Read: Wealth tax among Mboweni\u2019s budget options<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

With domestic financial markets likely to be swept along by the US election in early November, South African-specific events are back in focus this week, with the tabling of the Medium Term Budget Policy Statement (MTBPS) likely to dominate proceedings.<\/p>\n","protected":false},"author":10,"featured_media":279651,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13716],"tags":[26],"class_list":["post-443338","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-speech","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/443338","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=443338"}],"version-history":[{"count":7,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/443338\/revisions"}],"predecessor-version":[{"id":443380,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/443338\/revisions\/443380"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/279651"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=443338"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=443338"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=443338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}