THE 2006 NATIONAL BUDGET
1.0 Introduction
The Minister of Finance Trevor Manuel delivered his 10th highly anticipated budget on the 15th February 2006, with what the Market Economic Research (MER) termed ¡§a remarkably successful fiscal policy era continuing to be in evidence¡¨ The MER further attest to the fact that the overall tone of the budget is one of ¡§stability and conservatism¡¨.
Broadly speaking many commentators maintain the budget ¡§is conservative, credible, emphasises stability and sustainability, enhances the expected positive macroeconomic trajectory for South Africa; and is financial market friendly¡¨ (Du Toit, 2006).
Minister Manuel opened his speech by quoting Ben Okri¡¦s rendition of ¡¥A way of being free, 1997¡¨ ¡V ¡§There are no joys without the nightmares that precede them and spring them into light¡¨
2.0 South Africa¡¦s Economic Scenario
The Minister highlighted that 350 00 jobs were created in 2005, almost 1500 new jobs every working day.
Exports grew 12 % in real terms in 2005 and should continue to benefit from strong global growth, which will average 4.3 % in the next three years. Export growth is to benefit from continued commodity demand globally, favourable tourism trends and investment. Exports to Japan were highlighted. South Africa stands to benefit from Japan¡¦s improving economic outlook. Exports to Japan increased from 5 % of total exports in 2001 to 9 %.
The current account deficit rose to 4.2 % in 2005 from 3.4 % in 2004, and 1.3 % in 2003 and it is expected to remain steady at 4.4 % in 2006 and 4.3 % in 2007. It poses no major threat to local macroeconomic stability as it will be easily financed by capital inflows.
The MER has been more optimistic than consensus on economic growth prospects. Its forecas ...