The 2007 MTBPS: short on detail

Slides:



Advertisements
Similar presentations
Center for Emerging Market Enterprises
Advertisements

Fiscal Policy to Fine-Tune the Economy
The Macroeconomics of Public Expenditures Vandana Chandra, PRMEP PEAM Core Course January 12, 2004.
Supply Side policies. Supply side policies aim to… Improve the efficiency of factor markets, to boost productivity and hence the overall capacity of the.
Mobilizing international resources for development: Foreign direct investment and other private flows Mansoor Dailami New York February 15th, 2008 Manager,
The Israeli Economy: Maintaining a Thriving Economy in the Shadow of Terror Prof. Zvi Eckstein Deputy Governor, Bank of Israel The Jerusalem Center for.
Investment Opportunities: Balancing Act Presented by: Dawie Roodt 6 March 2008.
Saving, growth and the current account Daan Steenkamp ERSA / SASI Savings workshop August 2009.
The winning and losing nations (or Sunrise, Sunset and Serendipity – time to start dropping BRICs) Sixth Gresham Lecture Douglas McWilliams Mercers School.
Revision of the macroeconomic projections for 2011 Dimitar Bogov Governor August, 2011.
Measuring GDP and Economic Growth Chapter 1 Instructor: MELTEM INCE
Introduction to Macroeconomics
Fiscal policy 1. State Budget 2. Supply Side Economy 3. Government Expenditure Multiplier 4. Tax Multiplier 5. Expansionary Fiscal Policy 6. Crowding.
Copyright © 2008 Pearson Addison-Wesley. All rights reserved. Chapter 32 Government Debt and Deficits.
Unemployment AS economics presentation on the measurement and causes of unemployment.
Part 1 – The current economic environment INDONESIA’S CURRENT ACCOUNT CHALLENGE Richard Dutu Economist, Indonesia Desk OECD Economic Department.
Jac Laubscher Chief Economist Comments on the Annual Report of the South African Reserve Bank Parliamentary Committee on Finance 28 September 2001.
 Circular Flow of Income is a simplified model of the economy that shows the flow of money through the economy.
Fiscal Policy and Government Borrowing A2 Economics Presentation 2005.
Fiscal Policy & Aggregate Demand
Influence of foreign direct investment on macroeconomic stability Presenter: Governor CBBH: Kemal Kozarić.
J.P.Morgan Chase IV ASTANA Economic Forum Astana, Kazakhstan May 3-4, 2011 S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L The Global Economy:
1 Regional Economic Outlook Middle East, North Africa, Afghanistan, and Pakistan Masood Ahmed Director, Middle East and Central Asia Department International.
Fixed Income Investing in a Rising Rate Environment Paul O’Brien.
IGCSE®/O Level Economics
AN OVERVIEW ON TURKISH ECONOMY AND RECENT DEVELOPMENTS KEMAL UNAKITAN MINISTER OF FINANCE September 5, 2008 REPUBLIC OF TURKEY MINISTRY OF FINANCE.
The performance of an economy Economic indicators:  inflation rate  foreign trade  employment  productivity  interest rates  money supply Social.
MGMT 510 – Macroeconomics for Managers Presented By: Prof. Dr. Serhan Çiftçioğlu.
Brazil’s Development Strategy Nelson Barbosa November 7,
1 ENSURING AND SUSTAINING MACRO-ECONOMIC STABILITY 2010 Consultative Group / Annual Partnership Meeting Venue: La Palm Royal Beach Hotel, Accra Date: 23rd.
AQA Chapter 13: AS & AS Aggregate Demand. Understanding Aggregate Demand (AD) Aggregate Demand (AD) = –Total level of planned real expenditure on UK produced.
Economic and Social Update November 2007 William E. Wallace, Lead Economist World Bank, Indonesia November 2007.
The Impacts of Government Borrowing 1. Government Borrowing Affects Investment and the Trade Balance.
IGCSE®/O Level Economics
Trends in Ghana’s macro economy and the outlook Norway-Ghana Business Forum, November 5, 2015 Johnson P. Asiama (Dr.)
Introduction to the UK Economy. What are the key objectives of macroeconomic policy? Price Stability (CPI Inflation of 2%) Growth of Real GDP (National.
Fiscal Policy (Government Spending) Fiscal Policy and Government Spending.
The New Growth Model for Serbia: Monetary and Fiscal Policy Challenges Dejan Soskic – Governor, National Bank of Serbia Athens, 11 February 2011.
The 2006 national budget in a macro-economic context Jac Laubscher Group Economist 7 March 2006.
MINISTRY OF FINANCE ENSURING STABILITY AND GROWTH PLAMEN ORESHARSKI MINISTER OF FINANCE 12 December 2007 Sofia.
2015 Investment Outlook Yuntaek Pae, PhD, CFA Associate Professor of Finance, Lewis University.
6/10/2016 Fan He IWEP, CASS Structural Changes after the Global Financial Crisis: China's Perspective.
Unit 2 Glossary. Macroeconomics The study of issues that effect economies as a whole.
3.4.3 The International Economy Globalisation Trade The Balance of Payments Exchange Rate Systems The European Union (EU)
Economic Environment Workshop Two. Indicators of Economic Performance -Output -Unemployment -Inflation -Balance of Payments.
AS Economics PowerPoint Briefings Introduction to Macroeconomics AS Economics.
CABRI and World Bank Institute Training Programme Budget Management and Public Financial Accountability Presented by: Matthew Simmonds Chief Director:
Economic Growth and Development in Zambia
The 2008 National Budget: A Remarkable Document!
The 2006/7 Budget and Macroeconomic Policy
BULGARIA – ECONOMIC PERSPECTIVES
2005 MTBPS 25 October 2005 Introduction Macroeconomic overview
Introduction to Macroeconomics
The 2009 MTBPS: Managing a fiscal calamity
World Economic Situation and Prospects: 2018 View on India
Budget Balance and Government Debt
2002 Medium Term Budget Policy Statement October 2002
Introduction to the UK Economy
Introduction to Macroeconomics
Economics: Notes for Teachers
Russia. Recent Developments and Long-Term Challenges
The New Growth Model for Serbia: Monetary and Fiscal Policy Challenges
The 2006 Budget MINISTER OF FINANCE
MTBPS and macroeconomic assessment (Nov 2003)
Budget Policy Statement Macro-economic Policy
Portfolio Committee on Finance
2005 MTBPS 25 October 2005 Introduction Macroeconomic overview
Deficits and the Public Debt
Robust injection or damp squid?
FEDUSA SUBMISSION ON THE 2008 BUDGET
Presentation transcript:

The 2007 MTBPS: short on detail Jac Laubscher Group Economist 2 November 2007

The overriding themes Objectives are still the same: Accelerating growth Creating employment Reducing poverty and inequality Fiscal policy has done its part – it in now over to other policy arms of government, including better execution The gains in government’s financial position must be preserved Economic imbalances and risks require an emphasis on sustainability Fiscal policy must support monetary policy

Agenda Revised macro-economic forecast Revised estimates for 2007/08 Revised projections for 2008/09 to 2010/11 Introduction of structural budget balance Other policy matters Evaluation

Revised macro-economic forecast Higher inflation Higher interest rates Rebalancing of growth from consumption to investment Higher current account deficit Lower growth

Comparative macro-economic forecast 2007 2008 2009 Budget MTBPS Sanlam CPIX inflation 5.1 6.2 6.3 4.7 5.4 5.9 4.5 4.6 4.8 GDP growth 4.9 4.2 Current account -5.3 -6.7 -6.5 -5.7 -6.9 -6.8 -5.9 -7.7

Policy background and implications Growing and persistent imbalances in the economy Accelerating inflation Rising current account deficit International uncertainty abnormally high Implications: Caution required Monetary policy must be supported; tighter fiscal policy reduces need for higher interest rates But why then huge tax relief for individuals in recent years? Emphasis on structural reform

CPIX and Core Inflation

World growth vs. inflation

Flow of private capital to emerging markets

Current account balances (% of GDP) 2005 2006 2007F 2008F Mexico -0.6 -0.2 -1.0 -1.4 India -0.9 -2.2 -2.4 -2.3 Russia 8.8 7.7 5.0 4.3 South Africa -3.8 -6.4 -6.0 China 7.2 9.1 10.0 10.5 Brazil 1.6 1.3 0.8 0.3 Korea 1.9 0.7 Taiwan 4.6 7.1

Introduction of structural budget balance Emphasis on windfalls from buoyant international conditions High commodity prices/ improved terms of trade Strong inflow of capital Economy growing above potential implies revenue growth above potential Sustainability requires conservatism “Soft” concept Difficulty in separation of cyclical and structural change Difficulty of measuring potential output/ growth Should be seen as additional information, not as basis for policy decisions

The commodity price cycle

Terms of Trade

Net foreign portfolio investment

JSE vs. Emerging Market Equities

SA vs. USA 10-year Bond Yield + EM Spread

Revised estimates for 2007/08 Upward revision to gross tax revenue (+R9.5 billion) is more than expected Of upward revision to expenditure (+R8.5 billion), R4 billion (47%) to public corporations

Revised projections for 2008/09 to 2010/11 Projected growth in revenue increased in spite of reduced growth forecasts Introduction of structural balance encouraging boldness? Expenditure revised upwards but by less Resulting in continuing budget surpluses And rising cash balances Discouraging expectations for tax relief Alert: watch the wage bill Alert: watch the tax burden

Revised projections (Amount) 2007/08 2008/09 2009/10 2010/11 Budget MTBPS Revenue 544.6 553.1 591.2 616.0 641.5 679.6 740.5 % growth 14.5 14.9 8.6 11.4 8.5 10.3 8.9 Expenditure 533.9 542.4 594.2 599.9 650.3 665.6 726.2 13.4 15.4 11.3 10.6 9.4 11.0 9.1 % real growth 9.8 6.9 5.9 7.2 5.2 Balance 10.728 10.8 -3.032 16.2 -8.787 14.0 14.3

Policy matters NSSS and wage subsidy: vague Industrial policy: vague to critical; supporting lower tariffs more than incentives Tax policy: very little, e.g. on tax administration burden on small business Inflation targeting: nothing Exchange controls: nothing Eskom financing: nothing No capital injection? Dividend to continue? Not a matter of affordability: refusing fiscal ratios to be adjusted? Treated differently from other public corporations, levels of government: favoring restructuring, transport, communications

Evaluation Accelerating growth Maintaining macro-economic stability Improving sustainability Contributing to national savings Crowding in rather than crowding out Removing infrastructure bottlenecks Tax policy?

Evaluation Creating employment Accelerating growth Industrial and trade reform: raising labour intensity of growth Proposed wage subsidy

Evaluation Reducing poverty and inequality Creating employment Providing safety net Providing social wage Ongoing redistribution Increased allocations to e.g. health, education and training, access to modern economy