Category Economy
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Decoding the Budget 2019 – pie in the sky or hard reality

21 February 2019 STANLIB

SA’s minister of finance, Tito Mboweni, presented a measured budget in Parliament today, taking into account the country’s economic realities.

What emerged starkly from the budget is that SA’s lack of economic growth is hurting tax revenue. In 2018/19 tax revenue was R42.8 billion less than budgeted, across most revenue categories. Without higher economic growth, the country will struggle to generate the revenue it needs to make structural changes.

There were no big tax shocks in the budget but there was no compensation for bracket creep, which combined with inflation will increase the burden on consumers and squeeze consumer spending.

Local markets were nervous ahead of the budget. The rand weakened and the long-dated bond yield rose. Investors were anxious about how much funding government would provide to Eskom and how it would affect the deficit. But as it became clear government intends to involve the private sector in key SOEs, the rand strengthened and the key R186 returned to pre-budget levels.

We expect the budget will buy SA some time with the ratings agencies, in particular Moody’s Investors Service which is the only rating agency to maintain SA on an investment grade, with a stable outlook. It is likely that Moody’s will downgrade the outlook to negative in March and will make another assessment later of how the government is fulfilling its promises. If there is no economic growth, an increase in the deficit and a worsening of the debt burden, we believe SA is likely to face a ratings downgrade.

Listen to our chief economist, Kevin Lings, and co-head of Fixed Interest Victor Mphaphuli, decode what it means for markets, consumers, growth and the country’s credit rating and read more here...




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