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Pretoria - Economic growth this year will come to Finance Minister Pravin Gordhan's rescue, giving him extra revenue to finance additional spending and cut the deficit.
Gordhan has revised economic growth upwards to 2.3% for 2010, from a previous forecast of 1.5% in October.
Gordhan's forecast is still slightly below the consensus of private sector economists, who expect economic growth of about 2.6% this year. By revising his growth forecast, he has made his budget more credible without sacrificing caution.
Gordhan expected the 2010 Fifa World Cup to add 0.5 percentage points to growth this year.
There is some controversy among economists on how much the spectacle will add to growth, but Gordhan is going with the consensus with his forecast.
Gordhan also disclosed that real gross domestic product (GDP) growth was a negative 1.8% in 2009 - slightly better than some expectations of a 2% drop in GDP. Statistics SA will officially release the GDP figures for the last quarter of 2009 next week.
Gordhan said in his speech that, after declining by 0.8% in 2009, the world economy was expected to grow by 3.9% this year, driven largely by the momentum of China's industrial expansion, urbanisation and modernisation.
Sweeping global economic changes
"Yet many commentators caution that these positive trends may be short-lived, and that the world economy may yet experience a second recessionary wave," Gordhan said.
In the past year, the world economy had gone through its deepest recession in over 70 years. This year, employment creation in developed countries remained weak. Large fiscal deficits and emerging asset price bubbles in Asia signaled that the recovery was still fragile.
As with the boom period before 2008, the global recession would entail sweeping changes to the world economic landscape. Major industries from vehicles to telecommunications and energy were undergoing restructuring and rapid evolution.
Gordhan's growth forecasts for 2011 were 3.2%, and for 2012 3.6%. His forecasts for consumer inflation suggested inflation would remain high, with a 5.8% average projected for this year, 6.1% for next year and 5.9% for 2012.
- Fin24.com