Gordhan warns of uncertain times
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Cape Town - South Africa's Finance Minister Pravin Gordhan said on Wednesday although economic indicators showed the economy was on a recovery path after last year's recession there were uncertain times ahead.
South Africa's economic growth for the first quarter came in higher than expected but the National Treasury and the central bank have said fiscal woes in Europe, a key trading partner, could undermine future expansion.
"Let us recognise that we do have a very uncertain period ahead of us," Gordhan told parliament.
"There is no guarantees that the revenues will come as we think they will come, or that the economy will sustain the kind of growth indicators that it is giving us at the moment," he said.
The economy grew by 4.6% quarter-on-quarter on an annualised basis in the first quarter, picking up the recovery speed after exiting the first recession since 1992 in the third quarter of 2009.
The National Treasury has said its February forecast of 2.3% GDP growth for 2010 will likely be revised upwards in October.
Retail spending, a main driver of the economy previously, is however, expected to grow only slightly after the recession slashed about a million jobs and as consumers remain highly indebted.
Clear plan on debt management
Even with an uncertain revenue outlook, Gordhan said the government had a plan to manage its debt after it increased its borrowing to support the economy during the recession.
"In South Africa we have a very clear plan... to manage our debt. Let me repeat that the increase in our borrowing wasn't because of our own choice, it was forced upon us and we did it because we wanted to protect programmes of government," he said.
The fiscal deficit for 2009/10 came in at 6.7% of GDP, lower than the expected 7.3%. Gordhan said two weeks ago the government would trim the gap over the medium term.
On Wednesday he told parliament that the government would not borrow endlessly.
"The concerns that we have about debt service costs are valid. We increased from R57bn last year to about R104bn in three years time."
"We require a national consensus among all of us - that we can't just borrow endlessly nor can we spend endlessly on our interest payments ... we need to manage our fiscus in the right way," he said."