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Cape Town - "Boring" and "no surprises" are the words that are being used by politicians and economists alike on their expectations for Finance Minister Pravin Gordhan's budget speech on Wednesday.
They base these comments on what has already been revealed in the medium-term budget statement (MTBS), which is a mid-year update of government's budgeting process and by the fact that, on a macro-level, SA has firmly anchored itself to a policy of reducing its deficit.
President Jacob Zuma has already stated that the deficit, the difference between government revenue and its spending, should shrink from its current 6.7% to between 3% and 4% by 2013.
"A boring budget, with declining budget deficits in the years ahead, would be good because it would show a normalisation in economic and fiscal conditions after a steeper than expected recession in the wake of the sub-prime crisis," said Arthur Kamp, an economist at Sanlam Investment Management.
Such a boring budget, said Kamp, would be one that fits with the flavour of the New Growth Path, which promises tighter fiscal policy, and is in line with the MTBPS.
"Thus Treasury shouldn't deliver any surprises on Wednesday and, as a result, we are likely to return to the certainty generated by three-year plans," Kamp said.
Old Mutual Investment Group SA chief economist Rian le Roux is of a similar mind.
"Deficit reduction, infrastructure spending, and any sign of policy shock, is what the financial markets will be looking for. What I am saying is that we are looking for a boring Budget," he said.
Le Roux said government had no choice but to continue with deficit reduction so it could use fiscal policy in order to keep interest rates low.
Neither Le Roux nor Kamp expected anything outstanding to come of infrastructure spending plans, which may be directly related to the job creation strategy that government has hung its economic hat on.
"The growth in public sector infrastructure expenditure over the next three years is not likely to be as supportive of real economic growth as it has been in previous years," Kamp said.
According to Kamp, infrastructure spending is projected in the MTBPS to increase on average by less than 5% per year in current prices over the next three years and to decline from its current 9% of gross domestic product to 7.9% by 2013-14.
Nationalisation has been a hot topic in political circles, but Le Roux said the budget was not where the announcement on this would be made.
"I don't expect to see any direct reference to the 'N-word' there," he said.
African Christian Democratic Party finance spokesperson Steve Swart said that, from a political view point, he expected no surprises in the budget as he anticipated economic growth and revenue figures to be adjusted upwards and the budget deficit downwards, resulting in no tax rate increases, but limited personal tax relief and increases in indirect taxation.
He also expected more details on increased allocations to health, education, fighting crime and corruption and infrastructure development, as well as on the R9bn job fund and R20bn tax incentives and allowances for job creation and poverty alleviation.
"The challenge facing the minister will be to balance allocating limited resources to meet unlimited needs, particularly in view of the fact that parliamentarians have the power, as yet unused, to amend his budget proposals," Swart said.
Democratic Alliance shadow finance minister Dion George said that his party supported a counter cyclical fiscal policy and in its alternative budget actually recommended additional spending that would result in a deficit, but that this spending would be in certain strategic areas and strengthen the recovery of the economy without compromising long-term stability.
They base these comments on what has already been revealed in the medium-term budget statement (MTBS), which is a mid-year update of government's budgeting process and by the fact that, on a macro-level, SA has firmly anchored itself to a policy of reducing its deficit.
President Jacob Zuma has already stated that the deficit, the difference between government revenue and its spending, should shrink from its current 6.7% to between 3% and 4% by 2013.
"A boring budget, with declining budget deficits in the years ahead, would be good because it would show a normalisation in economic and fiscal conditions after a steeper than expected recession in the wake of the sub-prime crisis," said Arthur Kamp, an economist at Sanlam Investment Management.
Such a boring budget, said Kamp, would be one that fits with the flavour of the New Growth Path, which promises tighter fiscal policy, and is in line with the MTBPS.
"Thus Treasury shouldn't deliver any surprises on Wednesday and, as a result, we are likely to return to the certainty generated by three-year plans," Kamp said.
Old Mutual Investment Group SA chief economist Rian le Roux is of a similar mind.
"Deficit reduction, infrastructure spending, and any sign of policy shock, is what the financial markets will be looking for. What I am saying is that we are looking for a boring Budget," he said.
Le Roux said government had no choice but to continue with deficit reduction so it could use fiscal policy in order to keep interest rates low.
Neither Le Roux nor Kamp expected anything outstanding to come of infrastructure spending plans, which may be directly related to the job creation strategy that government has hung its economic hat on.
"The growth in public sector infrastructure expenditure over the next three years is not likely to be as supportive of real economic growth as it has been in previous years," Kamp said.
According to Kamp, infrastructure spending is projected in the MTBPS to increase on average by less than 5% per year in current prices over the next three years and to decline from its current 9% of gross domestic product to 7.9% by 2013-14.
Nationalisation has been a hot topic in political circles, but Le Roux said the budget was not where the announcement on this would be made.
"I don't expect to see any direct reference to the 'N-word' there," he said.
African Christian Democratic Party finance spokesperson Steve Swart said that, from a political view point, he expected no surprises in the budget as he anticipated economic growth and revenue figures to be adjusted upwards and the budget deficit downwards, resulting in no tax rate increases, but limited personal tax relief and increases in indirect taxation.
He also expected more details on increased allocations to health, education, fighting crime and corruption and infrastructure development, as well as on the R9bn job fund and R20bn tax incentives and allowances for job creation and poverty alleviation.
"The challenge facing the minister will be to balance allocating limited resources to meet unlimited needs, particularly in view of the fact that parliamentarians have the power, as yet unused, to amend his budget proposals," Swart said.
Democratic Alliance shadow finance minister Dion George said that his party supported a counter cyclical fiscal policy and in its alternative budget actually recommended additional spending that would result in a deficit, but that this spending would be in certain strategic areas and strengthen the recovery of the economy without compromising long-term stability.
