Filomena Scalise

The 2012 February Budget Review, released on Wednesday, has revised Gross Domestic Product (GDP) growth lower and consumer inflation higher this year relative to the February 2011 Budget Review.

This is in response to a period of exceptional global economic volatility, centred on concerns about sovereign debt levels and financial stability in advanced economies, which has boosted commodity prices and led to a depreciation in the rand in response to increased risk aversion.

The 2012 Budget sets out a fiscal framework that will narrow the gap between spending and revenue, while providing support to the economy and strengthening infrastructure investment for sustainable long-term growth.

Despite the deterioration in the global economic environment last year, the government kept to its October projection of 3.1% GDP growth in 2011 from 3.4% forecast in the February 2011 Budget. The uncertainty about the Eurozone means that growth for this year is cut to 2.7% in 2012 from 3.4% in October 2011 and 4.1% in February 2011.

Growth in 2013 is projected at 3.6% from 4.1% in October and 4.4% in February 2011. Growth goes back above 4% in 2014 at 4.2%, but this is still lower than the October 2011 forecast of 4.3% and the February 2011 projection of 4.4%.

The Treasury said however that growth at the levels projected remains insufficient for South Africa to meaningfully reduce unemployment and poverty in line with the objectives set out in the New Growth Path.

It has therefore started initiatives aimed at enhancing competitiveness and accelerating economic growth. Measures that broaden access to work opportunities, especially for young people, will enjoy special priority.

The actual consumer inflation was 5.0% in 2011. It is seen increasing to 6.2% (Oct 2011 5.4%; Feb 2011 5.2%) in 2012 and 5.3% (Oct 2011 5.6%; Feb 2011 5.2%) in 2013.

The Treasury expects GDP inflation to slow to an annual average of 6.1% in 2012 despite the fact that it has been above 7% in the past four years at 8.3% in 2008, 7.7% in 2009, 7.9% in 2010 and 7.2% in 2011.

The current account gap is revised to -3.3% of GDP in 2011 from -3.4% of GDP in October 2011 and -4.2% of the February 2011 Budget. It is then expected to deteriorate to -4.4% (Oct 2011 -4.0%; Feb 2011 -4.9%) in 2012, -4.5% (Oct 2011 -4.2%; Feb 2011 -5.0%) in 2013. - I-Net Bridge