Bold decisions are needed if the economy is to grow faster, reducing unemployment and “increasing competitiveness and innovation in a fast-changing world”, according to the annual Budget Review.

The 2014/15 Budget, outlined by Pravin Gordhan yesterday, highlights the National Development Plan, which will provide the framework for “economic and social development”.

While economic growth fell from 2.5 percent in 2012 to 1.9 percent last year, new power plants and transport infrastructure will boost gross domestic product over the next few years, according to the Budget Review.

Last year’s growth outcome was below the 2.7 percent forecast in the previous Budget and the 2.1 percent predicted in October last year. Growth this year is now put at 2.7 percent, down from last year’s expectation of 3.5 percent in 2014.

However, the review predicts that a “stronger global recovery will support exports” – the International Monetary Fund projects global economic growth will rise from 3.7 percent this year to 3.9 percent next year.

Also on an upbeat note, the review describes the outlook for emerging markets as “positive”, with projected economic growth of 5.1 percent this year up from 4.7 percent last year.

The comments come against a volatile backdrop for emerging markets, which have been hit by changes to US monetary policy. Rising interest rates in the largest economy have sucked money out of developing countries, sending currencies tumbling and eroding economic growth.

“Short-term capital flow volatility is likely to continue with consequences for the exchange rate, the current account and borrowing costs,” the review says.

However, the document predicts emerging economies will continue to grow and says the improvement in advanced economies will “translate into moderately higher demand for South African exports”.

An annexure notes: “Over the past two decades, South Africa’s economic prosperity has become increasingly intertwined with that of the rest of the continent.” And it predicts growth in sub-Saharan Africa will top 6 percent this year, which “will promote expanded trade and investment”.

Unemployment remains the most pressing challenge, with 4.8 million people unemployed and another 2.2 million classified as “discouraged”. The jobless rate was little changed at 24.2 percent in the fourth quarter from 24.5 percent a year earlier. – Ethel Hazelhurst