Simplifying Budget 2014: Fiscal conservativism to continue, Rand rebound justified

randIt’s easy to get distracted by all of the detail in the trillion rand plus Budget delivered today to Parliament by Pravin Gordhan. But the key numbers show despite this being an Election Year, feared populism has not materialised. Quite the contrary. Indeed, Treasury’s projections for the next three years reflect serious fiscal conservatism. Little wonder the South African Rand continued clawing back ground lost during the recent Emerging Market blow-out.

As the table below reflects, Treasury is projecting a reduction in its spending from the current 33.2% of GDP to 31.9%. At the other end, Revenue projections are being held at around 29% of the national economy. As a result, the country’s Budget deficit is projected to fall from the current 4% (low in global terms) to just 2.8% in the year to February 2017.

Interestingly, all of these projections are based on economic growth accelerating from its current 1.9% to 3% this year and 4% in the two years thereafter. – AH

12 months to:Feb-14Feb-15Feb-16Feb-17
EstimateForecastForecastForecast
RbnRbnRbnRbn
Revenue1010.51099.21201.31324.7
% GDP29.2%29.0%28.9%29.1%
Spending1149.31252.31351.61451.6
% GDP33.2%33.0%32.6%31.9%
Deficit-138.8-153.1-150.3-126.9
% of GDP-4.0%-4.0%-3.6%-2.8%
SA GDP3464.93789.64150.54552.9
GDP growth (nominal)9%10%10%
GDP growth (real)3%4%4%