'Tough' budget unveiled early

Cape Town - Finance Minister Trevor Manuel will deliver his 2009/10 budget speech on February 11, his office said on Monday.

Manuel usually unveils the main budget in the second half of February but is believed to have brought the date forward with a view to the upcoming national election, expected to be early next year.

This is also expected to be the long-serving finance minister's most difficult ever budget, given the global economic crisis, which has not left South Africa unscathed.

Manuel is also reportedly under pressure from some quarters within the ANC and its alliance partners who think he should be more relaxed in fiscal and monetary policy.

While some economists believe inflation has turned the corner and the October figure of 12.4% - down from August's year-on-year peak of 13.6% - is evidence of this change, it is still considerably higher than the target range of three to six percent, last seen about two years ago.

The volatility of the rand has also taken its toll recently against the major foreign currencies, particularly the United States dollar and the euro.

Last week, Reserve Bank Governor Tito Mboweni urged policy makers to take note of South Africa's economic slowdown.

Mboweni said third quarter GDP growth at 0.2% reflected significant contractions in mining, manufacturing and wholesale and retail trade.

He said the outlook "is not viewed as being particularly favourable".

The Reserve Bank's forecasts indicated that inflation should be back in the target range by the second quarter of 2010.

However, all is not doom and gloom, with the international oil price having declined significantly and global food price inflation apparently moderating.

- Sapa