South African households are bracing themselves for further devastating economic pressures, as the newly appointed Finance minister Tito Mboweni will be delivering the medium term budget policy statement next week.
Economists say although he may not raise taxes, especially before next year’s crucial election, he will have to find ways to balance government expenditure and revenue.
Tough times are ahead for the country’s households and consumers already reeling from high food and transport costs.
The country’s stagnant economy is forecast to grow at a meagre 0.7% this year.
A further increase in fuel prices next month, coupled with next year’s 4% increase in electricity tariffs, and a possible interest rate hike will add more fiscal burden on consumers.
But economists Arthur Kamp, Chief economist at Sanlam and Johann Els, the Head of Economic Research at Old Mutual, agree that Mboweni will be careful not to add to the load.
They don’t believe that Mboweni will raise VAT and PIT, but say he obviously target Sin taxes and try to reprioritise government expenditure.
Economists say the country’s borrowing capacity is severely limited and therefore Mboweni will need to reprioritise government’s budget to find new money for the 50-billion stimulus package to kick start growth.
Meanwhile, chances for an increase in interest rates are still here, especially if inflation exceed its targeted rate of 6%.