South African Treasury widens budget deficit forecast on economic growth concerns

The South African Treasury Department has widened its forecast for the budget deficit for the fiscal year 2016-17, governing concerns over the country’s declining rate of economic growth that has in turn, reduced tax revenue estimates.

The country’s budget deficit is forecasted at 3.4 percent of GDP from 3.2 percent previously, estimates released by South Africa’s Department of Treasury showed Wednesday.

Additional revenue measures and further spending cuts over the medium term should see net national debt stabilize at 47.9 percent of GDP in 2019-20, the report added.

Moreover, the department added that aggressive measures to cut down spending may revive investor as well as business confidence but will definitely lead to degradation in the country’s credit rating, higher interest rates and capital outflows.

Meanwhile, in its medium-term budget statement, Treasury said efforts to reduce borrowing had been frustrated by consistent downward adjustments to growth forecasts and tax revenue as household consumption and private sector investment fell, Reuters reported.