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SA taxes: Nowhere to go but up

26 February 2014   (0 Comments)
Posted by: Author: Rene Vollgraaff
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Author: Rene Vollgraaff (Bloomberg)

Gordhan expected to cut growth forecast.

Elections in May are deferring what may be an inevitable increase in taxes in South Africa as flagging economic growth undermines Finance Minister Pravin Gordhan’s budget targets.

Gordhan will probably cut his forecast for growth this year to 2.6 percent in his budget speech in two days time, from 3 percent predicted in October, according to the median estimate of 25 economists surveyed by Bloomberg. Since the mid-term budget four months ago, yields on 10-year rand government bonds jumped 133 basis points, the biggest gain after Turkey among 22 major emerging markets tracked by Bloomberg.

The Treasury is under pressure from credit-rating companies to stick to plans to narrow the budget deficit and limit debt growth as the ruling African National Congress campaigns for elections scheduled for May 7. While unlikely, raising taxes wouldn’t be the worst policy for Gordhan, 64, to implement as the economy struggles, said Martin Marinov, an emerging markets money manager at Raiffesen Kapitalanlage in Vienna.

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