Download 2014 Pre-Budget Briefing - Parliamentary Monitoring Group

2014 Pre-Budget Briefing
Parliamentary Budget Office | 19th February 2014
Outline
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Objectives
Global Economic Review and Outlook
SA Economic Review and Outlook
Fiscal Review and Outlook
Linking the Budget with the NDP
Risks
Issues for Consideration
Objectives
3
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To provide members with a review of the global and domestic
economic trends that influence policy and budget decisions.
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To track key policy developments since 1994.
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To highlight key economic, fiscal and policy trends, with
implications for the new budget.
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To highlight matters for consideration.
Global Economic Review and Outlook
4
Source:
IMF 2013
South African Economic Review and Outlook
5
GDP growth
Actual growth
7
Forecast: MTBPS 2011
Forecast: MTBPS 2012
After '94: Economic sanctions lifted and
SA economy reintegration with the global economy
NIPF
6
Forecast: MTBPS 2013
NGP
PICC
NDP
RDP
5
GEAR strategy to stabilise economy
annual growth (%)
4
Budget surplus
3
2
ASGISA
National Treasury
forecasts
1
0
Asian financial
crisis
-1
Effects of financial crisis
Global financial
crisis
-2
-3
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Fiscal Review and Outlook
6
Revenue, Expenditure and Budget Balance as % of GDP
% Budget Balance of GDP
% Revenue of GDP
% Expenditure of GDP
40.0%
Consolidation
Expansion
Invest for growth
Consolidation
35.0%
1994: RDP increase in the delivery of social goods
30.0%
1996: GEAR strategy to stimulate growth
25.0%
20.0%
15.0%
Between 1996 and 2000: Reshape intergovernmental fiscal environment and
introduce PFMA
2001: Micro Economic Reform Strategy
10.0%
5.0%
0.0%
-5.0%
-10.0%
Declining deficit
Increased public spending
High
spending
accumulated debt
2010: New Growth Path
2012: IPAP
2013: NDP
Spending Trends
7
Exchange Rate
8
Inflation
9
Source:
Stats SA
Linking the 2013 Budget with the NDP
10
Economic Affairs
(12.7%)
Housing and
Community
Amenities (11.1%)
Outcome 7:
Comprehensive Rural
Development
Outcome 8: Sustainable
human settlements and
improved quality
household life
Outcome 4: Decent
Employment through Inclusive
Growth
Social Protection (15%)
Outcome 13: An
inclusive and
responsive social
protection system
Outcome 2: A Long and
Healthy Life for All
South Africans
Outcome 1: Quality Basic
Education
General Public Service (15.4
%)
Outcome 5: Skilled and
capable workforce to
support an inclusive growth
path
Outcome 6: An Efficient,
Competitive and Responsive
Economic Infrastructure
Network
Outcome 11: Creating a
Better SA and
Contributing To a Better
and Safer Africa in a
Better World
Budget
Outcome 12: An efficient,
effective and development
oriented public service
Outcome 9: Responsive,
accountable, effective and
efficient developmental local
government system
Health (12.1%)
Education (19.6%)
Public Order and Safety
(9.3%)
Recreation and
Culture (0.8%)
Outcome 14:
Transforming Society and
Uniting The Country
Environmental
Protection (0.6%)
Defence (3.6%)
Outcome 3: All
People In South
Africa are and Feel
Safe
Outcome 3: All People In South
Africa are and Feel Safe
Outcome 11: Creating a Better
South Africa and Contributing to a
Better and Safer Africa in a Better
World
Outcome 10: Protect and
Enhance Our Environmental
Assets and Natural Resources
Global Risks
11
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Slower global recovery;
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Tapering-down of QE by the US;
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Low demand for SA exports; and
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Depressed demand for commodities.
Domestic Risks
12
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Policy uncertainty and discontinuity;
Labour unrest;
Service delivery protests;
Infrastructure bottlenecks (energy, transport; communications,
water);
Infrastructure slow spending;
Inflation;
Debt;
Interest rate hikes;
Exchange rate volatility.
Issues for Consideration
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Fiscal Policy and Budget Decisions
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The alignment of budget programme structures with plans is ideal to monitor
budget performance in respect of outcomes/goals/impact. Are there processes
in place to review budget programme structures?
Is the budget reflective of policy priorities i.e. NDP, IPAP, NGP, fiscal policy
objectives?
Is the country's budget policy-led? Does it adapt quickly to policy changes?
Will social safety allocations continue to expand in the face of poorer economic
performance?
Will the significant infrastructure allocations be maintained if growth slows
further?
Which programmes have been sacrificed to meet the budget deficit targets?
Issues for Consideration
14
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Fiscal Policy and Budget Decisions
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Will budget decisions attract foreign investors?
Are measures in place to curb the growth of, and even reduce, the public wage
bill component of the national budget?
Are the growth strategies that are formulated in the country given enough time to
realise their objectives before moving to the next one?
South Africa responded to the effects of the global financial crisis, low economic
growth and high and persistent unemployment, with counter-cyclical fiscal policy.
That is, increasing government spending during periods of weaker economic
conditions to stimulate economic activity. South Africa consequently began running
a fiscal deficit in 2009/10 in the wake of the global financial crisis, after 3 years
of surpluses. Will South Africa continue to embrace counter-cyclical policy?
Issues for Consideration
15
Economic and Monetary
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Certain risks facing South Africa are external, i.e. US Fed tapering, global
recovery and commodity prices, but we also face local risks such as labour
unrest, a growing public sector wage bill, energy shortages, slow
implementation of policy and volatility of the exchange rate. What measures
are in place to ensure these risks are mitigated?
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Inflation targeting regime. Should the band be reconsidered?
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What options does South Africa have to protect the value of the Rand?
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Will further depreciation of the Rand result in missing the budget deficit target
(4.3% for 2013/14)?
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Thank you
Prof. M Jahed
Alfred Monnakgotla
Mmapula Sekatane
Nelia Orlandi
Rashaad Amra