PARLIAMENT – On the eve of new Minister of Finance Tito Mboweni's, delivery of the Medium-term Budget Policy Statement (MTBPS), the parliamentary budget office (PBO) has forecast that the national budget deficit will reach 4 percent of gross domestic product (GDP) this year, compared to National Treasury's estimate of 3.6 percent.
The PBO's estimate is in line with that of Moody's ratings agency and is based mainly on lower than expected growth for the current financial year. It also made a more pessimistic forecast of the levels of debt as a percentage of GDP, predicting that it would reach 52.2 percent in 2020/21.
It told Parliament's standing committee on finance optimism about global recovery had been replaced with uncertainty and emerging markets were feeling the impact of recent sharp downturns in the exchange rate.
However, in terms of revenue collection, the picture was looking better for South Africa than anticipated.
PBO officials raised a number of questions about the government's stimulus package and its potential impact on the economy, saying there was scant detail on the planned allocations and whether government spending on this would be "deficit neutral".
It also questioned whether it would leverage adequate private sector investment to create a meaningful number of jobs.
Asked why the PBO believed National Treasury's forecast was off target, officials said the department's world class modelling unit had suffered a skills drain.