National Treasury’s action plan may not be enough – economists

17 July 2017

Industry does not view Finance Minister Malusi Gigaba’s new 14-point plan as likely to stimulate the growth South Africa desperately needs. Rather, economists are viewing it as a group of administrative measures that will only move to stabilise the battered economy.

Released on Thursday, Gigaba’s plan mapped out measures aimed at reversing South Africa’s downward recessionary economy, helping to break the country out of its low-growth trap.

“The acid test for Gigaba’s 14-point action plan is whether it will boost confidence in the economy by producing real outcomes,” noted North-West University School of Business and Governance economist Professor Raymond Parsons.

Parsons explained that the plan recognised that tough decisions needed to be made to mitigate the serious economic and political headwinds facing South Africa; however, the new action plan was not a policy statement.

“The real test of fiscal management will remain to be seen in the Medium-Term Budget Policy Statement (MTBPS) later this year as to whether any fiscal shocks emerge, especially from oversight issues on State-owned enterprises, such as Eskom and South African Airways. Fiscal discipline has been promised,” Parsons said.

The firm timelines for implementation and the assignment of tasks to specific Ministers was a promising positive step by government, which was now beginning to engage with what needed to be done if the economy was to be turned around and South Africa was to break out of its low-growth trap, he added.

Nomura International economist Peter Attard-Montalto said: “[Rather than structural reforms that could really kick start growth], what was offered up were measures that should help stabilise the economy at this very weak place by providing a floor under sentiment, but not provide upside to per capita income growth, in our view.”

“However, ratings agencies – we think Moody’s more than S&P – may give more benefit of the doubt and shift back timelines, watching for implementation. Ultimately, we think the growth needle not moving will be enough to secure further downgrades,” Attard-Montalto commented.

Nomura maintained its growth outlook of 0.2% for this year. 

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