Transcript MTBPS Presentation - Amazon Web Services

Medium Term Budget
Policy Statement:
Presentation
National Treasury
October 2008
Introduction
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Global economic context has changed considerably
Early decisions on fiscal policy, inflation targeting, gradual approach to
exchange controls, banking regulation and public spending choices will
allow us to weather the storm
Economic growth is likely to slow
Budget framework provides for continuing spending on infrastructure,
public services and programmes aimed at cushioning the poor against
slower growth
Key budget priorities include:
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–
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Other cross cutting priorities include:
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Improving the quality of education
Transforming health services
Reducing the levels of crime and enhancing citizen safety
Decreasing rural poverty
Expanding the built environment
Employment creation
Protecting the environment, reducing carbon emission levels
Improving the capacity of the State
The macroeconomic forecast
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Domestic and international factors weigh on South Africa’s economic growth
Growth slows to 3.7% in 2008 and 3.0% in 2009 before rising to 4.0% in 2010 and 4.3% in 2011.
Calendar year
2005
2006
2007
2008
Actual
2009
2010
Estimate
2011
Forecast
Percentage change unless otherwise indicated
Final household consumption
6.9
8.2
7.0
2.8
1.6
3.2
3.7
Final government consumption
4.8
5.2
5.0
4.5
4.0
4.0
4.0
Gross fixed capital formation
8.9
13.8
14.8
12.6
8.7
8.8
9.3
Gross domestic expenditure
5.7
9.2
6.0
3.6
3.0
5.5
5.2
Exports
8.0
5.6
8.3
2.6
2.9
4.4
6.0
Imports
10.3
18.8
10.4
2.6
3.2
8.9
8.2
Real GDP growth
5.0
5.4
5.1
3.7
3.0
4.0
4.3
GDP inflation
5.2
7.2
9.1
11.3
7.0
6.2
6.0
1541.1
1741.1
1996.9
2303.6
2538.4
2802.4
3098.2
3.9
4.6
6.5
11.6
-
-
-
-
-
-
-
6.2
5.3
4.7
-4.0
-6.5
-7.3
-7.6
-7.8
-8.9
-8.8
GDP at current prices (R billion)
CPIX inflation
Headline CPI Inflation
Current account balance
(percentage of GDP)
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Global economic landscape significantly altered by credit crisis
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Estimated cost of bank write-downs is
US$1.4 trillion (IMF, WEO)
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Financial market landscape irrevocably changed
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Unprecedented interventions by Governments and
Central Banks to alleviate market stress
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Financial distress resulting in falling asset prices
(house prices and equities)
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Lower credit availability constrains consumption,
investment and growth
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World economy slowing rapidly
World GDP growth
World
Emerging & developing countries
G7
SA growth (NT estimates)
9
% year-on-year
8
7
6
5
4
`
3
2
–
–
–
1
Source: IMF estimates for 2008 onwards
4
20
20 0 7
08
20 (f)
09
20 (f)
10
(f)
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Global slowdown will dampen export demand from
US, Europe and Japan
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Emerging markets affected by lower commodity
prices, reduced export demand, risk aversion.
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
19
98
0
US growth 1.6% in 2008 and 0.1% in 2009.
UK growth 1% in 2008 and -0.1% in 2009.
EU growth 1.3% in 2008 and 0.2% in 2009.
GDP growth affected by slowing domestic expenditure, supply
side interruptions and slower world economy
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GDP revisions driven by
– Slower global growth as industrialised and developing countries absorb the impact
of the credit crisis
– Declining commodity prices
– Slower consumption growth due to higher than expected inflation and interest rates
– Reduced wealth effects due to falling asset prices (housing and equities)
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Overall growth remains supported by
– Strong growth in real fixed capital formation (9% average over the medium term)
– Lower oil and food prices help to reduce inflation towards target next year
– Normalisation of agricultural output
– A weaker real rand exchange rate may provide an additional stimuli and cushion
the impact of lower commodity prices
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Investment remains key driver of growth over the MTEF
35
30
per cent y-o-y
25
20
Weighted growth rates
Public
Private
General gov corporations
business
2001
-0.6
-0.5
4.6
2002
0.8
1.1
1.8
2003
1.3
2.0
5.8
2004
0.4
0.7
7.8
2005
-0.1
1.3
7.8
2006
1.9
1.7
10.1
2007
0.1
3.7
11.0
2008 *
0.4
3.6
9.0
* First half of 2008 weighted by sector share in GDFI
Investment will account for
about 1.5% points of growth
over the medium term
15
10
5
0
General gov
Public corporations
Private business enterprises
-5
-10
2001
6
2002
2003
2004
2005
2006
2007
2008H1
Inflation set to decline as pressures from high food and oil prices
subside
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From January 2009, new target measure for inflation will be Headline CPI for all urban areas.
Stats SA revamping of inflation statistics is in line with international best practice.
Headline CPI projected to decline within target by 3Q 2009 and average 6.2% next year.
Lower food and oil prices will relieve pressures, but weaker rand poses upside risk.
Inflation target measure will change to headline CPI (including owners equivalent rent)
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14
Other
Transport
Food
Major contributors to CPIX inflation
12
Per cent
10
8
6
4
2
0
-2
2000
2001
2002
2003
2004
2005
2006
2007
2008
Sustaining economic growth
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Global economic weakness places renewed emphasis on promoting productivity
growth, domestic competitiveness, and efficiency gains… implement growth
recommendations.
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Focus on government contribution to reducing costs of economic activity and
expanding markets with infrastructure.
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Well capitalised and prudently regulated banking system along with well
developed and deep domestic capital markets are key strengths.
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Fiscal policy offsets short-term economic slowdown while maintaining positive
saving rate.
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Monetary policy to support rebuilding of household savings in the short-term,
manage inflation expectations and support capital inflows.
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Exchange rate flexibility allows SA to re-price lower to keep in line with other
emerging market economies and (with IT) maintain competitiveness.
Revenue trends and tax policy
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Estimated gross tax revenue for 2008/09 to remain unchanged at R642.3 billion
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Tax/GDP ratio revised down to 26.5%, from 27.3% at the time of the Budget
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Tax buoyancy will moderate over the near term.
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Composition of tax revenues for 2008/09 will change
– Expect more from PIT due to higher wage inflation and less from some indirect taxes,
e.g Customs duties and Transfer duties
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Key reforms this year
– Converting STC into a dividend tax at shareholder level by the end of 2009 or early 2010
• Introduction of electricity tax postponed to 1July 2009
– Significant tax incentives to support
• Industrial development
• Construction of low cost housing by employers and landlords
• Indirect equity investments in small and medium size businesses and junior mining
exploration companies
• Newly constructed and renovated buildings in Urban Development Zones
– Simplification of taxation of lump sum withdrawals (pre-retirement) from retirement funds as
from 1 March 2009
– Tax compliance burden of micro businesses reduced with the introduction of a presumptive
turnover tax as from 1 March 2009
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Expenditure
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Additions over 2008 budget baseline totals R170.8 billion
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R60 billion in loan transfer to Eskom between 2008/09 to 2009/10
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R59 billion inflation adjustments
Real growth averaging 6 per cent over MTEF
Additional expenditure in 2008/09 of R27.7 billion
Expenditure
2007/08
R billion
Consolidated National Expenditure
per cent GDP
Debt service costs
per cent GDP
Non-interest expenditure 1
per cent GDP
per cent GDP (excluding Eskom)
real growth(excluding Eskom)
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2008/09
2008/09
2009/10
Budget 2008 Revised estim ate
558.0
27.1%
52.9
2.6%
505.1
24.5%
24.5%
8.1%
631.5
27.6%
51.2
2.2%
580.3
25.4%
25.4%
7.7%
650.3
27.5%
53.9
2.3%
596.4
25.2%
24.8%
4.0%
2010/11
2011/12
Projection
754.3
29.0%
52.7
2.0%
701.6
27.0%
25.8%
7.0%
814.5
28.4%
55.1
1.9%
759.3
26.5%
25.8%
4.7%
868.6
27.4%
56.7
1.8%
811.9
25.6%
25.6%
4.9%
Key spending trends
70,000
R million (1995/96 prices)
60,000
50,000
Education
Health
Social security and welfare
Built environment (including roads)
Criminal justice sector
40,000
30,000
20,000
19
95
/
19 96
96
/
19 97
97
/
19 98
98
/
19 99
99
/
20 00
00
/
20 01
01
/
20 02
02
/
20 03
03
/
20 04
04
/
20 05
05
/
20 06
06
/
20 07
07
/
20 08
08
/
20 09
09
/
20 10
10
/
20 11
11
/12
10,000
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Proposed allocation of additional resources by sector
Distribution of additional funds per function: MTEF 2009
(excl. Eskom)
Defence and
intelligence
4%
Justice, police
and prisons
9%
Water, Agriculture
and Transport
11%
Other economic
services
13%
Housing and
community development
4%
Welfare and
social security
11%
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Administration
15%
Health
17%
Education
16%
Components of in-year adjustments 2008/09
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In-year adjustments result in the expenditure level increasing from
R611.1 billion to R635.5 billion
Changes announced in the adjustment budget:
– R7.7 billion in inflation-related adjustments
– Disasters such as adverse weather conditions, amounting to R2 billion
– 2010 FIFA World Cup stadium development amounting to R1.4 billion
– ‘Last mile’ Access Network between the world cup stadium venues and the
Telkom National Network amounting to R600 million
– Political Office Bearers Pension Fund amounting to R2.5 billion
– Occupation specific dispensation for nurses amounting to R1 billion
– Road Accident Fund amounting to R2.5 billion
– Social relief of distress amounting to R500 million
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Provincial Government
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Provincial Government
R7.6 billion for in-year adjustments for personnel related increases and
disasters
Provincial allocations increased by R51.3 billion over next 3 years or 10.8%
increase per year
– R32.3 billion added to equitable share
• R7.8 billion for personnel
– Including for new salary scales for doctors and medical
professionals and more teachers
• R3.1 billion for extension of no fee schools, lowering of learner/educator
ratios and inclusive education
• Rx billion for three new vaccines
• R2.4 billion for TB, reducing child mortality and general health
• R1 billion for social development and roads
– Conditional grants increased by R19 billion
• More for infrastructure, housing and agriculture support
• Loan to Gauteng government for Gautrain Rapid Link
• School nutrition programme expanded
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Local government
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LG allocations increases by R8.8 billion over next 3 years or 12.6%
increase per year
R2.9 billion is added to equitable share for increased basic services
costs (mainly electricity)
R5.9 billion is added to infrastructure and related grants
– R4.3 billion for Municipal Infrastructure Grant and R184 million for direct
Integrated National Electrification Programme Grant
– R1.3 billion for 2010 FIFA World Cup commitments (transport and
stadiums)
– R2.4 billion in-kind transfers to LG include Eskom electrification
programme, regional bulk infrastructure (water) and electricity demandside management
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Finance Bill 2008
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Unauthorised Expenditure:
Overspending of a vote or a main division within a vote
Expenditure that was not made in accordance with the purpose of a vote or in accordance with
the purpose of the main division
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Schedule 1:
R32.2 million unauthorised due to overspending of a vote, by the Department of Trade and
Industry during 2003/04. Direct charge against the NRF in terms of PFMA s34(1)(a)
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Schedule 2:
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R439.1 million: overspending of individual programmes by Presidency, departments of
Foreign Affairs, Land Affairs, Justice and Constitutional Development and Public Works
in terms of PFMA s34(1)(b)
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R6 million: deviations from tender procedures by the Department of Justice and
Constitutional Development in terms of the since-repealed Exchequer Act.
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These funds were previously surrendered to the NRF and will have no additional
expenditure implications
Conclusion
• The budget framework takes account of the more difficult
global environment
• The period ahead will see slower growth, but the fiscal
position is strong enough to accommodate this environment
• Public investment and expansion of public services will
continue
• Country must focus on raising growth potential for the longer
term
• This requires
– Sound macroeconomic policies
– Continued investment and better public services
– Better implementation of microeconomic policies to ensure a
more export oriented economy and a more labour intensive
growth trajectory
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