Finance Minister Tito Mboweni to stick close to February budget

The forecast for this fiscal year’s deficit is 0.2 percentage point bigger at 3.8% of GDP, the poll showed.

New Finance Minister Tito Mboweni. Picture: Cindy Archillies/EWN

JOHANNESBURG - South Africa’s new Finance Minister Tito Mboweni will stick closely next week to previous budget forecasts for the coming two fiscal years, with only slight slippages due to poor revenues, economists predicted in a Reuters poll.

The forecast for this fiscal year’s deficit is 0.2 percentage point bigger at 3.8% of GDP, the poll showed. Mboweni will tweak next year’s estimate in his budget review on 24 October but reiterate February’s call for a fall to 3.5% in 2020/21, the economists predicted.

This time last year, then-Treasury chief Malusi Gigaba painted a shocking picture of a R50.8 billion rand shortfall in revenues for the year ending last March.

He was more hopeful in his February statement although official data showed the economy unexpectedly slipped into recession earlier this year.

“There is very likely to be some slippage amid weaker growth, R30 billion more for the public sector wage bill. The question is how significant the slippage will be,” said Hugo Pienaar, economist at the Bureau for Economic Research.

Not much has improved since South Africa inaugurated President Cyril Ramaphosa in February. Two finance ministers have left and economic growth is now forecast at 0.8% this year, down from 1.4% expected when he took office.

The latest forecast is unchanged from a September poll.

To plug revenue shortfalls, value-added tax (VAT) was raised by Gigaba in February’s budget to 15%, a move that has put consumers under significant financial strain.

“With a new Finance Minister [Mboweni] for the second time this year, October’s mini-Budget will be keenly watched, but will likely deliver a similar path to the Budget released at the start of the year,” said Annabel Bishop, chief economist at Investec.

Ramaphosa appointed former central bank governor Mboweni as Finance Minister on Tuesday, replacing Nhlanhla Nene who admitted to having meetings with the business family at the centre of alleged corruption.

Economists said the budget review next Wednesday was likely to have been signed off before Mboweni was appointed and will probably expand on Ramaphosa’s reform plans, including re-prioritising R50 billion of public spending to boost economic growth and create jobs.

Consumer inflation is predicted to average 4.7% this year and 5.4% next, while the South African Reserve Bank’s repo rate is expected to be lifted to 25 basis points to 6.75% in either January or March.

The repo rate is then expected to be stable for the rest of 2019 and raised to 7% in 2020.