The SA Daily
23 February 2018
Effective reform and growth pass-through
- After the 2018 Budget, S&P ratings agency said that while it was good to see debt stabilisation, growth would be key to the government meeting its new targets.
- One way in which SA can achieve sustainably higher growth is through effective policy implementation. This was also stressed in President Ramaphosa’s State of the Nation Address (SONA). The SONA highlighted the need for key structural changes in order to achieve higher, and inclusive, growth. Specifically, policy reform in the mining, agricultural, manufacturing and tourism sectors were stressed.
- In the 2018 Budget, the National Treasury provided some estimates of the pass-through to growth if certain policies relating to key sectors were successfully implemented. The results indicate that with current potential growth at 1.5%, successful reforms would add around 2.2pps to growth and thereby increase growth to 3.7%.
- As a base case, we believe that SA will avoid a downgrade next month by Moody’s. However, over the medium-term, policy implementation will be monitored by rating agencies, because it is SA growth, more than the fiscal metrics, that underperforms relative to countries with similar credit ratings.
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