#Budget2018: Risks to economic, fiscal outlook still elevated

Cape Town - Revenue collection for 2017/18 is projected to be R2.6bn higher than the October 2017 estimate, according to Budget 2018 delivered on Wednesday.

Yet, compared to the Budget 2017 estimates, this still leaves a shortfall of R48.2bn in 2017/18. Budget 2018 states that risks to the economic and fiscal outlook remain elevated:

  • The recovery in economic growth is not yet broad-based. Much depends on continued improvements in political and policy certainty, and a supportive global environment. Tax buoyancy, which declined over the past two years, may not increase as quickly as projected.
  • Talks on a new public service wage agreement are in progress. An agreement locking in salary increases that exceed consumer price index inflation would make expenditure limits difficult to achieve.
  • While decisive action by government to strengthen governance at Eskom has staved off the likelihood of near-term default, the financial positions of the power utility and several other large entities pose risks to the economy and the fiscus.
  • The costs associated with fee-free higher education and training are uncertain. The Department of Higher Education and Training will need to ensure that its plans are aligned with allocations.
  • A sub-investment downgrade for local and foreign currency debt by Moody’s would result in South Africa’s exclusion from the Citi World Government Bond Index, triggering a sell-off of South African debt. This would raise future borrowing and debt service costs.

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