The 2004/5 Budget to be presented on February 18 will not be an “election” budget, in that it will provide goodies to voters, but it will nevertheless be expansionary, Efficient Group chief economist Dawie Roodt told a media briefing late last week.
“In common with the 1999 budget, the Minister of Finance will not pander to the electorate. Nonetheless I expect him to give some R5,6-billion back to taxpayers, as he increases the tax threshold for small businesses to R250 000 from R150 000, as well as increasing the tax brackets for individuals,” Roodt said.
Roodt expected only 2,3% GDP growth in 2004 compared with the 3,3% forecast by the Treasury in November. He forecast no change in interest rates this year, while the current account deficit would remain at R18,7-billion this year.
He expected the year-end rand per US dollar rate to be 8,40 compared with the current 6,57 with most of the depreciation coming through in the second half of this year.
Roodt expected less volatility in the rand as the South African Reserve Bank bought dollars to boost its reserves when the rand was strong. Stronger reserves should then in turn mean that South Africa would be less vulnerable to speculative attacks.
What concerned him on the expenditure side was the sharp 26,3% jump in general government costs between the 2003/4 Budget and the 2004/5 spending indicated by the Medium Term Budget Policy Statement (MTBPS).
“General government costs are essentially administration costs, rather than delivery of services or transfer payments, so that is a worrying development,” Roodt said.
Roodt welcomed the increase in social welfare payments, as more people were dependent on them to alleviate poverty. He expected both old age and disability grants to increase by E70 per month. He also thought that farmers would get between E500-million and R1-billion to assuage the effects of the drought.
Roodt forecast that the Treasury would “book” a R10-billion profit on the foreign exchange forward book operated by the South African Reserve Bank on behalf of the Treasury. — I-Net Bridge