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Brief note intended as a more regular interface with our clients. The emphasis is to provide our interpretation of important economic events, such as South African Reserve Bank interest rate statements, and key data releases, including GDP growth figures.
Against the backdrop of a challenging macroeconomic environment, Finance Minister Pravin Gordhan presented a 2014 budget that should be relatively well received by SA consumers and the international ratings community. Starting with the consumer, there was no increase in the top marginal personal income tax rate as speculated in some quarters. However, the tax bracket adjustments did not fully compensate taxpayers for the impact of higher inflation. From a ratings agency perspective, the Budget presented accelerated fiscal consolidation over the next three fiscal years (the MTEF period) compared to October’s medium-term budget policy statement (MTBPS). The lower budget deficits are a function of a somewhat higher nominal GDP growth forecast that improved the revenue outlook. Importantly, the Treasury also made a further downward revision to the growth in non-interest government expenditure.
