Treasury lowers 2016 economic growth outlook to 0.9%
The Treasury has revised down its economic growth forecast as expected‚ with Finance Minister Pravin Gordhan saying there is “no doubt” that the economy is “in crisis” but that solutions are being explored. Gordhan tabled the 2016-17 budget in Parliament on Wednesday.
Economic growth was revised down to 0.9% for this year from 1.7% in October‚ mainly on lower commodity prices‚ higher borrowing costs‚ diminished business and consumer confidence‚ and the effects of drought. The Treasury conceded that actual economic growth could be lower than currently projected.
Low economic growth suggests a slower pace of job creation and lower revenue collection.
The growth outlook for next year was cut to 1.7% from 2.6%‚ while that for 2018 was revised to 2.4% from 2.8%. “Improved global conditions and rising confidence are expected to result in a moderate improvement in economic growth by 2018‚” the Treasury said in its budget review document.
Inflation is likely to breach the upper end of the 3% to 6% target band this year at a 6.8% average‚ and 6.3% next year on higher food prices and a weak rand. Inflation is then seen coming down slightly to an average of 5.9% in 2018.
The current account shortfall is expected at 4% of gross domestic product this year‚ narrowing slightly to 3.9% next year and in 2018.