Nene’s maiden budget tipped to trim growth

FINANCE Minister Nhlanhla Nene’s first medium-term budget tomorrow was likely to contain revisions of the country’s fiscal debt, growth, inflation and debt forecasts, as well as hints on potential tax changes, Investec said yesterday. Investec economist Annabel Bishop predicted Nene would cut the Treasury’s February forecast of year-on-year gross domestic product (GDP) product growth of 2.7 percent to 1.5 percent. She added this had been expected, but meant the minister had to guard against government’s direct debt rising as Moody’s rating agency had warned South Africa risked a further downgrade if it was allowed to escalate in an unsustainable manner. “Should the medium-term budget policy statement deliver higher net debt ratio projections, or fiscal slippage with the fiscal deficit projected to reach 3 percent of GDP after 2016/17, then South Africa could receive a further credit rating downgrade, which would then cause the rand to weaken closer to our down case.” But Bishop said communication from the Treasury ahead of the budget had signalled a commitment to fiscal efforts to avoid this scenario. – Sapa page 14