Economist Lavan Gopaul says Finance Minister Pravin Gordhan will have to come up with strategies to ensure new tax policies are implemented to keep the national economy afloat, but at the same time go easy on consumers’ disposable income.
Gordhan will deliver his Budget Speech from Parliament tomorrow at 2pm. Attention will be fixed on the budget allocation for government’s ambitious National Development Plan. Gopaul says Gordhan will also have to make a significant contribution to social grant increases.
“There are a number of reasons why an increase in the tax rate is going to be unfavourable, certainly from a private point of view. Individuals will have less disposable income and less money in their wallets. Now this is a particularly big problem from an economic point of view because it means that consumer spending is going to be down, so it will lead to a shrinking economy.”
Meanwhile, reducing unemployment, inequality and eliminating poverty are likely to be central themes of this budget. These inferences are drawn from the State of the Nation address and the National Development Plan by Investec’s Chief economist Annabel Bishop.
She says social welfare and education are likely to remain the core focus of expenditure in 2013 and in future budgets.
Bishop says the focus should be placed on the production side of the economy to stimulate growth.
Government is also expected to take steps to address the concerns of rating agencies and foreign investors, following recent downgrades.
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