Economists: Fiscus leaner than budgeted for

Johannesburg - There is huge pressure on state revenue and on Tuesday the finance minister will throw more light on this in his Medium-Term Budget Framework (MTBF). Other than this, economists do not expect any fireworks in the MTBF.

Nedbank chief economist Dennis Dykes said the budget framework will give an indication of the size of the budget deficit, but he expects no announcement in terms of new taxation to fund it.

He said the budget deficit could be up to 5.6% of the gross domestic product (GDP), compared to the 3% mooted in February.

This was owing to softer collections of Value Added Tax (VAT) and the weak economy, said Gryphon Asset Management economist Abri du Plessis.

Investec Bank economist Annabel Bishop expects a shortfall of 5,7% for the consolidated budget. The forecast for the national budget (excluding, provinces, social security amd selected public entities)  is between 6.0% and 6.7% of GDP.

Dykes said there were pressing issues, such as financing the National Health Insurance (NHI) and other social grants, but these would possibly receive attention only in February 2012.

Announcements on tax increases, he said, were traditionally not made in the MTBF.

He said government had little room to manoeuvre in raising taxes, even with the heavy pressure on the fiscus.

Bishop said an increase in taxation would be short-sighted because it would retard economic growth and lead to further job losses. She said it was possible that further particulars regarding the New Growth Plan for the economy would be given because there had been much work done on it.

Bishop expects a further relaxation of exchange control because recent reasons for its retention are not justified against the background of the new far-reaching regulations for the global banking sector.

So far this year the government has collected only 36.3% of its budget, compared with 38.5% for the same period last year. State expenditure has however not fallen accordingly and it matches that of last year.

Bishop does not expect the budgeted expenditure to be adjusted, which will mean the budget deficit will increase.

There is a possibility that the collection of revenue will improve in the final quarter of the year, but Bishop says government still needs to curtail spending.

"A good point of departure would be curtailing the rapid salary and wage increases in the public sector."