South Africa’s Finance Minister, Nhlanhla Nene said the country’s projected growth was not enough to address challenges the country was facing.
Addressing delegates in Johannesburg attending the Third Commonwealth Stakeholders’ Conference on Public Debt Management and User Group Meeting said South Africa’s economic recovery from the crisis has been much slower than anticipated.
“We have projected growth of 2.0 per cent in 2015. While this is an achievable and realistic target, two per cent is not nearly enough to deliver the kind of tax revenue that we need to address our challenges,” said Nene.
He also warned that, with the normalisation of monetary policy in advanced economies, the “easy money” is slowly drying up and this has risks for countries.
Nene called on countries to carefully consider the trade-offs between short term and long term growth.
“This is reflected in decisions about the balance between taxation and debt issuance on the one hand and the balance between investment spending and spending on current expenditure on the other,” he added.
The Finance Minister said, getting this balance right is made even more challenging by the fact that we live in uncertain times.
“There are questions as to whether the current low growth environment reflects a period of adjustment or a prolonged lower growth scenario. Countries urgently require structural reforms to raise growth levels and address the lingering impact of the crisis on unemployment, including 50 per cent youth unemployment in some countries, and debt overhangs.”
Nene said South Africa has acknowledged that, while the global economy has been a drag, the main constraints to growth are domestic in nature.
“Recent data shows that the domestic economic landscape remains a challenging one. GDP growth in the first quarter of 2015 was at 1.3 per cent quarter-on-quarter on a seasonally adjusted and annualised basis, highlighting the negative impact of the energy challenges that the country is facing,” he said.
“We have taken several steps to address the energy challenge and expect that economic growth will reach 3 per cent by 2017, as more electricity comes onto the grid and as consumer spending improves and trade with the rest of Africa rises.”
Nene said, countries that are dependent on international capital flows will need to have stable macroeconomic frameworks in place so they can withstand negative shocks that come from the global economy.
“Stable, predictable and transparent fiscal and monetary policies are critical in raising confidence and attracting investment.”
Nene added that, as far as sound debt management is concerned, we have learned that there were a few non-negotiables and those include, prudent macroeconomic policies, fiscal and monetary discipline, building a strong and liquid local currency bond markets and promoting policies that make a country an investment-friendly destination.