While the figures paint a gloomy picture, with 2019’s growth forecast down to 0.5 percent from 1.5 percent, the medium-term budget policy statement (MTBPS) delivered by Finance Minister Tito Mboweni was underpinned by fiscal prudence and presents the right trajectory to unlock much-needed future economic growth for South Africa.
This is the opinion of Ben Bierman, Managing Director of Business Partners Limited (BUSINESS/PARTNERS), who hopes that this positive trajectory is enough to avoid a downgrade by Moody’s in the upcoming credit rating review. “Taking into account our debt-to-GDP ratio, which is set to reach 70 percent over the next two years, there is a high risk of Moody’s changing its outlook on the nation’s credit rating to negative on Friday.
“However, Mboweni’s proposed measures to grow the economy may just be enough for South Africa to hold onto its only investment-grade credit rating,” he adds.
That said, Bierman notes that follow through on these proposed measures will be critical to getting the country’s economic engines up-and-going again. “The growth ingredients mentioned, such as lowering barriers to entry, promoting open and beneficial trade, and prioritising job-creating sectors, are vital for unlocking economic growth in South Africa.”
According to the MTBPS, growth is projected to slowly rise to 1.7 percent in 2022. While this growth outlook is admittedly still lower than the desired levels to drive the economic recovery required, Bierman notes that it is more than triple the level of growth achieved this year.
“If we can put our words into action and successfully grow our economy at this rate, there is still a light at the end of this tunnel,” Bierman concludes.