Finance Minister, Malusi Gigaba Picture: EPA

PARLIAMENT - South Africa has slashed its projected gross domestic product (GDP) growth forecast for 2017 by almost half, from 1.3 percent forecast in the February budget to 0.7 percent, as a result of continued decline in business and consumer confidence that has gathered pace since 2014.

According to the 2017 Medium-Term Budget Policy Statement (MTBPS), revisions to the forecast reflected a significant deterioration in business and consumer confidence over the past year.

Finance Minister Malusi Gigaba presented the MTBPS in Parliament on Wednesday to set out the fiscal policy objectives and government's spending priorities over the three-year expenditure period.

The MTBPS said that policy and political uncertainty - coupled with weak confidence, discouraged investment and consumption - remained central risks to the domestic economic outlook. 

According to the MTBPS, delays in finalising key regulatory processes, as well as a pattern of poor governance in several large state-owned companies, contributed to concerns about policy uncertainty. 

Further risks included a downgrade of the local currency rating and higher administrative prices, which could result in higher inflation.

This weak economic growth is expected to have direct consequences for investment, job creation and household spending, and reinforce the country's legacy of socioeconomic exclusion. 

The World Bank last month slashed the South African economic growth outlook for this year to 0.6 percent, from the 1.1 percent it forecast earlier in the year, despite a second quarter growth of 2.5 percent.

In May, the South African Reserve Bank had also cut the country's 2017 growth forecast to one percent.

The odds are stacked against the country's economic outlook as it confronts a low growth trap, which would make it vulnerable to external factors, despite the world economy continuing to strengthen. 

The MTBPS said higher global growth can benefit South Africa's medium- to long-term growth prospects if the country can boost investment and export competitiveness.  

The country consumes more than it produces, and relies on foreign savings to finance the gap between low levels of domestic savings and the capital required for its investments. 

As a result, the MTBPS called for decisive action to be taken for a new growth trajectory if the country wants to avoid remaining caught in a cycle of weak growth, mounting government debt, shrinking budgets and rising unemployment.

The MTBPS said a new cycle of "inclusive development" required a clear intervention to stimulate economic activity by ensuring effective regulation, improving the competitiveness of manufactured exports, promoting localisation and re-industrialising the economy. 

A set of 14 actions agreed to by Cabinet to revive investment includes the appointment of a new board and chief executive to lead a turnaround at South African Airways (SAA), considering proposals for the budget facility for large infrastructure projects, implementing new procurement regulations, and signing into law the Financial Sector Regulation Act.

- African News Agency (ANA)