17 Feb.
Nedbank Economic Commentary: Preview of National Budget 2012.
A lower budget deficit on higher than projected revenue growth, limited tax relief and continued focus on infrastructure and job creation.
- In 2011/12, a reasonable economy, which propped up relatively robust consumer spending, will have helped to reduce the deficit to about 4,5% of gdp, considerably below October’s revised estimate of 5,5% of gdp.
- In 2012/13 through to 2014/15, a growing economy will help to reduce the budget deficit to below the psychologically-important 3% of gdp level over a shorter time period than originally envisaged.
- Personal tax relief is likely to be limited, consisting mainly of compensation for the effects of inflation.
- Company tax relief will take the form of selective incentives to encourage expansions and employment. The key themes on the expenditure side of the budget are likely to be infrastructure, health care and education.
- Further exchange control relaxation is likely to be limited following significant concessions in 2010 and 2011.
The expected outcome of the 2011/12 National Budget
Finance Minister Pravin Gordhan will report some improvement in public finances when he tables his third budget next week Wednesday. The global and local economic recoveries, albeit patchy and moderate, have produced better revenue growth than originally anticipated, which has helped to reduce the deficit and will create some room to manoeuvre. However, the task remains difficult. The outlook for the economy in 2012 remains uncertain given the troubles in Europe. The deficit is still high and needs to be reduced, while President Zuma has announced an ambitious infrastructure spending programme and previous social spending commitments especially around health care still need to be substantiated. …
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