Finance Minister Nhlanhla Nene is going to have to cut his coat according to his cloth when he tables his medium-term budget policy statement (mini budget) in parliament next week.
In the face of serial growth disappointments and the uncertain global outlook‚ economists are expecting Nene to table an austerity budget that raises taxes and cuts government expenditure.
Without such measures‚ SA will be unable to stick to its debt and deficit reduction targets on which its credit-worthiness depends.
The International Monetary Fund (IMF) urged countries to take measures to lift their growth rates as global economic prospects weaken.
During its annual meetings held in Lima‚ Peru‚ at the weekend‚ the IMF noted that‚ as a result of China’s shift to a new growth model and impending US interest rates hikes‚ developing countries were being hit by declining commodity prices‚ reduced capital inflows‚ currency depreciation and rising market volatility.
Nene and South African Reserve Bank governor Lesetja Kganyago attended the Peru meeting. Business Day was unable to obtain comment from either as they were travelling.
Meanwhile‚ the global “spillovers” were larger than anticipated‚ weakening emerging market growth.
As a result‚ the IMF downgraded its global growth forecast to 3.1% for 2015 compared to the 3.4% achieved last year.
Worst affected are commodity exporting emerging market countries such as SA. The emerging market slowdown is rebounding on the developed world‚ where the IMF considers the main risk to be that already low growth will slow anew‚ particularly if global demand falters further and supply constraints are not removed.
“While these uncertainties and transitions may look daunting‚ I believe they can be managed with the right mix of policies to support demand‚ strengthen financial stability and implement structural reforms‚” IMF managing director Christine Lagarde said in her address.
She noted that emerging market countries had helped pull the global economy back from the brink of another Great Depression a few years ago; they had accounted for almost 80% of global growth over the past five years; and they now generated more than half of global output.
The remedy‚ she said‚ was for every country to implement “specific policy upgrades”.
In the case of advanced countries‚ this meant “giving due consideration to the risks of spillovers from their policy decisions”‚ she said‚ in an apparent reference to imminent monetary policy tightening by the US.
The IMF‚ in turn‚ advised emerging market and developing countries to use any available policy space to smooth the adjustment to less favourable external conditions.
The IMF has downgraded SA’s growth outlook to 1.4% in 2015‚ 1.3% in 2016 and 2.0% in 2017. The Treasury’s February forecast‚ on which the current medium-term budget depends‚ anticipated growth of 2.0% this year rising to 3.0% by 2017.
“Commodity exporting countries with worsening terms of trade and limited buffers may need to reassess their fiscal policies in the face of lower commodity related revenue‚” advised the IMF. — BDLive
No relief in sight for consumers
In the face of serial growth disappointments and the uncertain global outlook‚ economists are expecting Nene to table an austerity budget that raises taxes and cuts government expenditure.
Without such measures‚ SA will be unable to stick to its debt and deficit reduction targets on which its credit-worthiness depends.
The International Monetary Fund (IMF) urged countries to take measures to lift their growth rates as global economic prospects weaken.
During its annual meetings held in Lima‚ Peru‚ at the weekend‚ the IMF noted that‚ as a result of China’s shift to a new growth model and impending US interest rates hikes‚ developing countries were being hit by declining commodity prices‚ reduced capital inflows‚ currency depreciation and rising market volatility.
Nene and South African Reserve Bank governor Lesetja Kganyago attended the Peru meeting. Business Day was unable to obtain comment from either as they were travelling.
Meanwhile‚ the global “spillovers” were larger than anticipated‚ weakening emerging market growth.
As a result‚ the IMF downgraded its global growth forecast to 3.1% for 2015 compared to the 3.4% achieved last year.
Worst affected are commodity exporting emerging market countries such as SA. The emerging market slowdown is rebounding on the developed world‚ where the IMF considers the main risk to be that already low growth will slow anew‚ particularly if global demand falters further and supply constraints are not removed.
“While these uncertainties and transitions may look daunting‚ I believe they can be managed with the right mix of policies to support demand‚ strengthen financial stability and implement structural reforms‚” IMF managing director Christine Lagarde said in her address.
She noted that emerging market countries had helped pull the global economy back from the brink of another Great Depression a few years ago; they had accounted for almost 80% of global growth over the past five years; and they now generated more than half of global output.
The remedy‚ she said‚ was for every country to implement “specific policy upgrades”.
In the case of advanced countries‚ this meant “giving due consideration to the risks of spillovers from their policy decisions”‚ she said‚ in an apparent reference to imminent monetary policy tightening by the US.
The IMF‚ in turn‚ advised emerging market and developing countries to use any available policy space to smooth the adjustment to less favourable external conditions.
The IMF has downgraded SA’s growth outlook to 1.4% in 2015‚ 1.3% in 2016 and 2.0% in 2017. The Treasury’s February forecast‚ on which the current medium-term budget depends‚ anticipated growth of 2.0% this year rising to 3.0% by 2017.
“Commodity exporting countries with worsening terms of trade and limited buffers may need to reassess their fiscal policies in the face of lower commodity related revenue‚” advised the IMF. — BDLive
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