Govt ready to buffer economy if necessary: Gordhan
South Africa sees a 60% chance against a global double-dip recession and is ready to take action to buffer the local economy through managing debt, the budget deficit and providing stimulus, says Finance Minister Pravin Gordhan.
South African markets have been battered this week in a wave of global risk aversion due to debt worries in the US and Europe, and some analysts see a possible recession that would also hit Africa’s biggest economy.
“One of the questions that you might raise is, are we heading for a double-dip? I think our own view at the moment is its 60-40 against a double-dip,” Gordhan told a post-cabinet media briefing.
“There are other people who are saying its now 50-50 depending on the decisiveness with which the rest of the world begins to tackle its problems as well, but let’s wait and see and we’ll keep South Africa informed about what we need to do.”
Gordhan and Reserve Bank Governor Gill Marcus said in a joint statement on Monday they would act to mitigate any financial stability risks after domestic markets tumbled in a sell-off worsened by a US credit downgrade over the weekend.
On Thursday Gordhan said South Africa would take a “growth friendly fiscal consolidation approach” over the next three years and remained committed to cutting its budget deficit as stated in February.
The Treasury forecast a deficit of 5.3% for the 2011-12 fiscal year, narrowing to 4.8% by 2012-13.
South Africa would fund a proposed National Health Insurance programme through the fiscus, employers’ contributions and other funding mechanisms and the government did not want the plan to increase the burden on taxpayers, Gordhan said.
“There is money in the systems and there may be extra money required,” he said.
The NHI, which is aimed at giving greater access to healthcare for the country’s poor, will require R125-billion in 2012, R214-billion by 2020 and R255-billion by 2025, said a government source, citing a policy paper to be released on Friday.