Well, the Budget turned out to be a relatively benign experience given what could have emerged- seems the fiscal cupboard is not entirely bare yet.
A 5% reduction in the tax tables for individuals, but a paltry increase for social pensions and grants, otherwise most taxes are unchanged… oh yes, sin tax is up along with fuel as expected:
In other news, global markets took a knock yesterday and the Rand compensated with a bigger 4% drop overnight. So, it’s business as usual then.
Enjoy your Friday!
In the News this Week:
- Macroeconomic assumptions: National Treasury revised its growth forecasts to a less severe contraction of 7.2% for 2020 from the 7.8% anticipated at the time of the October 2020 Medium Term Budget Policy Statement (MTBPS). The economy is forecast to grow by 3.3% in 2021 (unchanged from October) before expanding by 2.2% (up from 1.7%) and 1.6% (up from 1.5%) in 2022 and 2023 respectively.
- The budget deficit for 2020/21 is slightly smaller, albeit still exceptionally high, at 14% of GDP compared with the October estimate of 15.7% of GDP. National Treasury also aims to reduce the deficit at a slightly faster pace than indicated in the MTBPS. The budget deficit for 2021/22 is budgeted to narrow to 9% of GDP before moderating to 6.3% of GDP by 2023/24
- Revenue for 2020/21 is projected to be 6.7% higher than in the MTBPS. In 2021/22, revenue will jump to R1.6 trillion, supported by the anticipated economic recovery and the low base of the past fiscal year. Expenditure for 2020/21 is only slightly higher than the October estimate but fractionally lower as a percentage of GDP at 41.7% compared with 41.9%. The expenditure estimates for 2021/22 to 2023/24 are all modestly higher than projected in October but still reflect considerable expenditure restraint. The outcome still hinges on the government’s ability to contain the public sector wage bill’s growth.
- Debt metrics: The debt-to-GDP ratio improves significantly due to the lower deficit projections and the anticipated economic growth trajectory. The gross-government-debt-to-GDP ratio is now projected to rise from 63.3% in 2019/20 to 80.3% in 2020/21, slightly lower than 81.8% anticipated last October. After that, the ratio will climb to 84.9% in 2023/24, much lower than October’s estimate of 92.9%. The debt burden is projected to stabilise at 88.9% in 2024/25, also much lower than 95.3% projected in the MTBPS.
- Financing: Deficit financing will primarily be via long-term domestic loans, with most issuance on the long-end of the curve.
- The rand lost momentum last week, weighed down by concerns of the vaccine’s effectiveness and the country’s fiscal position.
- Consumer inflation edged up to 3.2% y-o-y in January.
- Retail sales continued to recover in December, but sales were down by 7% for 2020 as a whole.
- The Eurozone economy contracted by an estimated 0.6% q-o-q in the final quarter of 2020 from a 12.4% rebound in the previous quarter.
- Major advanced economies’ preliminary manufacturing PMI’s rose in February, while the services sector still has some catching up to do.
Please give us a call or email if you need any assistance. Have a great weekend!
Kind regards,
Your TurnPoint Team
Vic Hodoul CFP®
Certified Financial Planner®
Cell +27 (0) 79 353 1076 Email vic@turnpoint.co.za
Office/Admin Manager: Arlene Schoeman: +27 (0)21 555 1010 Email arlene@turnpoint.co.za
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