CAPE TOWN, Oct 26 (NNN-SA NEWS) — Finance Minister Malusi Gigaba says the National Treasury has revised South Africa’s economic growth projections downwards to 0.7 per cent for 2017.

This comes not long after the economy emerged from a technical recession brought about by a 0. per cent contraction in the first quarter of 2017 following on 0.3 per cent drop in the final quarter of 2016, he noted when he presenting the Medium Term Budget Policy Statement (MTBPS) in the National Assembly here Wednesday.

We have had to revise economic growth projections downwards from 1.3 per cent, as tabled at the time of the budget, to 0.7 per cent for 2017. Growth is subsequently expected to increase slowly reaching 1.9 per cent in 2020, he added.

Therefore, we have the power to change our course, the political, social and economic agency to chart a new path.

He said the global environment might be helpful as growth was improving, despite persisting risks. The International Monetary Fund (IMF) has projected that global growth will average 3.6 per cent in 2017 and reach 3.7 per cent in 2018, he said.

According to National Treasury, revisions to the country’s growth forecast reflect a significant deterioration in business and consumer confidence over the past year. Other contributing factors include weaker-than-anticipated growth in the fourth quarter of 2016, a large contraction in the finance sector in the first quarter of 2017 and a higher risk premium, reflected in higher bond yields.

The impact of domestic factors on economic growth has been partially offset by improved global growth and commodity prices. Growth in household spending increased marginally to 1.1 per cent in the first half of the year from 0.6 per cent over the same period of 2016, the Treasury said.

Nominal year-on-year growth in salaries was 7.0 per cent in the second quarter of 2017, with strong increases in general government services. Hoever, high debt levels continue to constrain household spending. The ratio of household debt to disposable income was 73 per cent in the first half of 2017 and growth in household consumption expenditure is projected to increase only 1.0 per cent in 2017, reaching 1.9 per cent in 2020 as employment growth strengthens and confidence improves.

Meanwhile, South Africa’s inflation is expected to average 5.4 per cent in 2017, according to Gigaba’s Medium Term Budget Policy Statement (MTBPS). Inflation expectations remain near the upper end of the target band of between 3.0 and 6.0 percent.

The mini-budget also noted that policy and political uncertainty remain central risks to the domestic economic outlook.

Elevated policy and political uncertainty, coupled with weak confidence, discourage investment and consumption. Further risks include a downgrade of the local currency rating and higher administrative prices, which would lead to higher inflation.