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Author: Sapa|

28 February 2013 11:34

Mixed reactions to budget

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High spending could increase inflation rates to up to 2.3% in the next 3years.

There were mixed reactions to the national budget from credit rating agencies, according to a report on Thursday.

The comments from Fitch Ratings, Moody's Investors Service and Standard and Poor's (S&P) reflected the differences in their assessments when they all downgraded SA over the past five months, the BusinessDay reported.

S&P and Fitch gave SA a BBB rating, but Fitch has a stable outlook on its assessment. Moody's has given SA a Baal rating - a notch above the other two - but with a negative outlook.

Moody's vice-president Kristin Lindow said the budget seemed to be "credit-positive", given Treasury's commitment to curb spending in the face of flagging tax revenue and to stick to its goal of significantly reducing the fiscal deficit.

Finance Minister Pravin Gordhan on Wednesday announced that real spending, which takes account of inflation, would rise by 2.3 percent over each of the coming three years, down from the 2.9 percent growth that the Treasury had flagged in October.

Fitch Ratings said the budget highlighted the threat posed by weaker than expected economic growth and underperforming revenue collection posed to fiscal consolidation in the next three years.

S&P and Southern Africa MD Konrad Reuss said last year's budget outcome was disappointing and a "good reminder of the fact that the risks are really stacked to the downside" in terms of South Africa's fiscal performance.

If global economy did not perform as well as expected, South Africa's growth and tax would also suffer, putting the country in the same situation as last year, which would "more urgently demand spending cuts", he said.

Topics: Gordhan, inflation, high spending.

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