Heat is on as eyes turn to Gordhan, key numbers

Johannesburg - The heat is on as Finance Minister Pravin Gordhan prepares to deliver his mid-term budget later on Wednesday at a time when the economy is stagnating, the nation stands on the brink of a junk credit rating and universities have been rocked by student protesters demanding free education.

READ: Political noise could undermine credible mini budget – Goldman Sachs

Here’s are some of the key issues to look out for:

How gloomy is the growth outlook?

While Gordhan forecast in February that the economy would grow 0.9% this year, soft commodity prices, a lackluster global economy and a crippling drought have put that target beyond reach.

READ: Weak SA economy muddies budget as downgrade looms

The 2016 growth rate will probably be just 0.4%, according to the median estimate of 24 economists surveyed by Bloomberg. The International Monetary Fund is even more pessimistic, forecasting an expansion in gross domestic product of 0.1%.

Will the Treasury stick to its budget deficit targets?

The malaise in the economy is curbing tax revenue, frustrating Gordhan’s efforts to rein in the budget deficit - key to maintaining an investment-grade credit rating.

READ: Mini budget: Only so much Gordhan can do

The fiscal gap is likely to be 3.4% for the year through March 2017, and narrow to 3% by fiscal 2019, according to the median estimates of economists surveyed by Bloomberg. That compares with a deficit target of 3.2% for the current fiscal year, 2.8% for fiscal 2018 and 2.4% the year after that in the February budget.

How will debt levels be affected?

Gross loan debt as a percentage of GDP shot up to 50.5% in the 2016 fiscal year, from 41% just three years earlier.

The ratio is projected to peak at 51% next year, before declining to 50.5% in fiscal 2019, according to the February budget. Ratings companies and investors are likely to frown on any slippage of that target.

READ: Mini budget: Expect up to R12bn tax revenue shortfall - economist

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