BUDGET 2005/06
Economic growth forecast at 4.3%
Richard Mantu
25 February 2005
South Africa's economy is expected to grow at a rate of 4.3% in 2005/06 and to average 4.2% growth over the next three years, says Finance Minister Trevor Manuel.
Gross fixed capital formation growth is projected to average 7% between 2005/06 and 2007/08, with exports rising by about 4.5% a year.
Delivering his Budget speech in Cape Town on Wednesday, Manuel said that consumer inflation was expected to average 4% in 2005, rising to between 5% and 5.5% percent in 2006 and 2007.
South African's foreign exchange reserves had increased to over US$15-billion - four times more than the current short-term debt level.
The state expected to raise R11-billion more than budgeted for 2004/05, thanks to the strength of the country's economy coupled with "excellent work" by the tax and customs team, Manuel said.
Non-interest spending for 2004/05 was R5.2-billion higher than the original estimate, with the largest adjustments being for
social grants, drought relief and municipal rates and taxes.
Manuel said the country's deficit for 2004/05 ought to come in at 2.3% of gross domestic product (GDP), and that debt service costs would be 3.5% of GDP, down from 5.6% of GDP six years ago.
"Our budget framework for the next three years sees revenue as a share of GDP average 24.2%. We anticipate a deficit of 3.1% of GDP next year, falling to 2.7% by 2007/08.
"Total expenditure, excluding interest costs and a contingency reserve, rises from R363-billion in 2005/06 to R428-billion by [2007/08]."
Consolidated real non-interest expenditure would grow at 7.5% in 2005/06, and at an average of 5% over the next three years, Manuel said.
He said the projections allowed an additional R74.4-billion to be added to the allocations of national departments, provinces and municipalities over the next three years.
Other allocations over the 2005/06 - 2007/08 period include:
- R22.3-billion to
improve support for the vulnerable through social security grants.
- R6-billion to finalise rural land restitution.
- R2-billion for the new comprehensive housing strategy.
- R1.7-billion for municipal infrastructure.
- R3-billion for public transport and transport infrastructure.
- R1-billion for recapitalising SA's further education and training colleges.
- R776-million for the National Student Financial Aid Scheme.
- R500-million for expanded capacity in water resource management.
- R6.9-billion to improve teachers' salaries and R4.2-billion for police salaries.
- R1.4-billion to support SA's African agenda, including Africa-wide peacekeeping operations.
Source: BuaNews
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