Packirisamy said that Moody’s methodology is still likely to produce an investment grade outcome for the country’s sovereign rating on 1 November 2019.
“The number of discouraged work-seekers – those who have given up looking for work for a period longer than four weeks – rose by 640,000 and the number of unemployed persons deteriorated by 1.3 million during this period.” Using these real GDP growth and inflation forecasts to proxy the outcome of the nominal GDP deflator, the firm sees 1.3% downside to Treasury’s forecasts between 2019/20 and 2021/22, which could further burden revenue collection, Packirisamy said.Growth in government revenue has disappointed in the fiscal year – for the first five months of FY19/20 – relative to the average for the past five years, Momentum said.Growth of 6.
Tax shortfalls have occurred in spite of the implementation of additional tax hikes, including the 1% VAT increase and an increase in taxes for the top tax bracket, said Packirisamy. “Additional hikes to the VAT rate and CIT are unlikely at this stage. Meagre consumption spending by consumers argues for stable VAT rates after the hike to 15% in April 2018, while relatively high CIT rates and government’s desire to draw foreign direct investment towards the country suggests little scope to raise CIT rates further,” Packirisamy said.As part of the February 2019 national budget, government said it had reduced departments’ budget baselines by R50.
South African Airways , Denel, and the South African Broadcast Corporation have also received multi-billion-rand bailouts this year.Momentum Investments said that policy uncertainty continues to stymie growth efforts in the economy.
It is scary how close we are to mass job losses in government. Damned if you do, damned if you don’t.
Noted.
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