Cape Town - Finance Minister Pravin Gordhan will have to face up to a tough economic environment and high expectations as he takes to the podium to deliver his annual National Budget.
The troubled manufacturing and mining sectors have contributed to a slowdown in South Africa's gross domestic product, Stats SA data released on Tuesday shows.
The economy grew by 2.5% in 2012 from 3.5% the previous year, the statistics agency said.
According to TimesLive the slowdown will weigh on Gordhan who is faced with a long spending wish list from various state departments.
Analysts have said the finance minister will be forced to increase taxes, particularly for high-income earners.
When companies report losses in profit there is less tax for the SA Revenue Services (Sars) to collect. When more people are unemployed there is also less income tax for Sars to collect. And already cash strapped consumers are less likely to spend which also decreases contributions in value-added tax.
Gordhan was expected to announce changes to the tax system during his address.
"He might also have to be a tad cautious in terms of the usual compensation for inflation that he makes to income tax brackets," Investec Asset Management's Andre Roux told TimesLive, which meant taxpayers would see their spending power decline.
Gordhan said in his medium-term budget policy statement last October that he expected SA's budget deficit to be about 4.8% of GDP. This could limit the scope for cutting income taxes, the report said.
Roux also suggested Gordhan may revise GDP expectations
downwards to no more than 2.5%. Lower economic growth would lessen the chances
of reining in the budget deficit "unless deep spending cuts were made or
taxes raised", the report said.