South Africa is likely to miss its 1.3% growth target this year and may have to curb spending to stick to its budget framework, finance minister Malusi Gigaba said on Thursday.
“We do believe there are a number of hard decisions that will have to be made,” Gigaba told reporters in Pretoria. “We will look at where we can get money and where we need to reprioritise so that we can meet our fiscal targets.”
Gigaba has faced an uphill battle to revive growth and restore investor confidence in the economy since being appointed to his post on 31 March. He replaced the respected Pravin Gordhan, who had clashed with President Jacob Zuma over a nuclear expansion plan and the management of state-owned companies.
S&P Global Ratings and Fitch Ratings cut their foreign-currency assessments of South Africa to junk in April, with Moody’s Investors Service reducing it to the lowest investment grade this month as the economy slipped into recession for the first time since 2009.
The government has pledged fiscal discipline to meet the budget-deficit target of 3.1% of GDP in the year to March. Fitch estimates a gap of 3.3%, saying budget cuts it anticipates the national treasury will make later this year won’t be sufficient to offset a tax shortfall.
The government is committed to addressing the concerns raised by the ratings companies, has heeded calls for greater policy certainty and sees faster and more inclusive growth as its top priority, Gigaba said.
“If we don’t react to this situation, the economy will get into deeper trouble,” he said. “We are all frustrated by the lack of growth which, if sustained, will compromise our ability to rapidly reduce unemployment, poverty and inequality.”
Zuma convened an urgent meeting with some ministers on Wednesday night to discuss interventions to help the economy and will hold a full-day gathering in two weeks time, where the government will complete an “action plan” to boost the economy, Gigaba said. — Reported by Arabile Gumede and Mike Cohen, (c) 2017 Bloomberg LP