South Africa delayed plans to rein in the budget deficit as a slump in economic growth curbed tax revenue and a spreading debt crisis in Europe undermined a global recovery.
The fiscal gap will widen to 5.5 percent of gross domestic product in the year through March 2012, from a revised 4.6 percent last year, the National Treasury said in its mid-term budget, released today. Borrowing plans will remain unchanged this year as the government draws down cash balances.
Finance Minister Pravin Gordhan, 62, has moved further away from a fiscal policy that saw the government post budget surpluses as recently as three years ago. Tax revenue has deteriorated as Europe’s debt crisis and weak global growth curbed demand for exports, eroded business confidence and pushed unemployment to 25.7 percent.
“The global environment poses considerable risks to the world economic recovery and the outlook for our own economy,” Gordhan told lawmakers in Cape Town. “The crisis of leadership currently reflected in the euro zone and in Europe is having a damaging effect on the global economy, including our own.”
The deficit is expected to narrow to 5.2 percent in fiscal 2012 and 4.5 percent the following year. In the February budget, the Treasury forecast an unchanged deficit of 5.3 percent for the current fiscal year, 4.8 percent in 2012/13 and 3.8 percent the year after that. The revisions are in line with the median estimate of seven economists surveyed by Bloomberg.
