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Pretoria - Finance Minister Pravin Gordhan has sketched a gloomy view of South Africa's economic prospects over the next three years, forecasting economic growth even lower than that of private sector economists.
The macro-economic projections in the Medium-Term Budget Policy Statement (MTBPS) show that Gordhan expected the economy to shrink by 1.9% this year ? in line with private sector estimates.
But he then only expects growth of 1.5% in 2010, whereas many private-sector economists expect growth of 2.5%. Growth is then expected in the MTBPS to rise to 2.7% in 2011 and 3.2% in 2012.
The bottom line is that it's going to take South Africa a long time to emerge from its current economic malaise into a much healthier situation.
Gordhan's gloomy outlook for the economy for next three years is unusual for a finance minister, as they are normally known to wear rose-tinted glasses. The MTBPS forecast is a far cry from the picture painted by Gordhan's predecessor, Trevor Manuel, in the February budget. Then the economy was expected to grow by 1.2% this year and by 3% next year.
"South Africa is beginning to emerge from its first recession in 17 years, but the recovery is likely to be slow and uneven, with job creation lagging the return to growth and many households continuing to face hardship," said the MTBPS.
"Healthy public finances, and strong partnerships with business and labour, have enabled government to reduce the impact of the crisis," the MTBPS said.
The sector dragging down gross domestic product (GDP) next year, according to the MTBPS, is expected to be household consumption expenditure.
Government consumption is forecast to grow at a healthy clip of 4.7% - slower than in 2009 but still strong. A theme of the MTBPS is that government should cushion the economy from the blows of economic crisis.
In a nod to the left, while trying to keep business on side at the same time, the MTBPS said: "The events of the past year [the global financial crisis] illustrate the dangers of laissez-faire economics, in which financial systems are allowed to operate without prudential supervision and regulation. This leads to boom-bust cycles that do great harm to ordinary people, their livelihoods and savings."
- Fin24.com