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Johannesburg - The lower projection for the consolidated budget deficit by Finance Minister Pravin Gordhan reflected accounting changes, Sanlam said on Wednesday.
"The consolidated budget deficit for 2013/14 is now projected at 4.2%, lower than the 4.6% projected at the time the budget was read in February 2013," said Sanlam Investment Management economist Arthur Kamp.
"This mostly reflects accounting changes, in line with the IMF Government Finance Statistics Manual of 2001, which allows certain extraordinary receipts to be recorded as non-tax revenue."
He said growth disappointment had been a problem for the Treasury. Its revised real gross domestic product forecast of around three percent to 3.5% over the next three years was significantly lower than in previous years, but was still reasonable.
As a result, the deficit was expected to narrow at a slower pace over the medium-term.
"Importantly, the expected narrowing in the budget deficit over the next three years relies on material expenditure restraint, with the Treasury leaving the expenditure ceiling mapped out in the 2013 budget unchanged," said Kamp.
"Certainly, in recent years, the Treasury has built a sound track record in sticking to its expenditure targets."
However, to achieve the projected expenditure numbers, the Treasury had to restrict real, non-interest expenditure growth to 2.2% on average per annum over the next three year.
This was compared to the 3.2% average for the past three fiscal years, Kamp said.
This implied that total consolidated expenditure had to decline from 32.8% of GDP in the current fiscal year to 31.7% by 2016/17.
"That is a difficult task in an economy where the unemployment rate is at levels consistent with the US during the Great Depression," he said.
