Mboweni: SA economy forecast to grow at 0.5% this year

While delivering the MTBPS, Finance Minister Tito Mboweni said that urgent economic reforms were necessary.

FILE: Minister of Finance Tito Mboweni at Parliament in Cape Town. Picture: GCIS.

CAPE TOWN - Finance Minister Tito Mboweni says the economy is now forecast to grow at 0.5% this year compared to the 1.5% that was expected in his February Budget.

Delivering the first Medium Term Budget Policy Statement of President Cyril Ramaphosa’s new administration, Mboweni also revealed a revenue shortfall of nearly R53 billion.

Mboweni said government’s wage bill must come down and he also hinted at the possibility of having to raise taxes next year.

He said the consolidated budget deficit was now projected to rise from R3 trillion to R4.5 trillion in the next three years – and that without policy changes, the debt will most likely exceed 70% of GDP by 2022/23.

Mboweni said the country had found itself in a serious position and that there was no status quo option. He said urgent economic reforms were necessary.

“Stabilisation involves difficult decisions that imply sacrifices by all of us. Slowing growth in the compensation bill and additional revenue measures will be needed.”

Mboweni said the consequences of inaction would be dire.

“The consequence of not acting now would be grave for South Africa. Over time, the country would likely face mounting debt service costs and higher interest rates and may enter a debt trap. The unemployment crisis would worsen and government debt could balloon. This is an outcome we all are determined to avoid.”

Mboweni said his February Budget would deal with tax policy changes.

He said on the current trajectory, debt service costs would be bigger than state spending on health and economic development in just three years’ time.