Global markets are in turmoil and central banks are responding with emergency interest rate cuts while those countries with fiscal space are putting together stimulus packages primarily geared to healthcare spending to help fight the COVID-19 pandemic. The US Fed cut rates by 50 basis points followed by the Bank of Canada and the Bank of England with similar magnitude of rate cuts. Other central banks including the People’s Bank of China and other emerging markets have done so and already. Conditions dictate that the South African Reserve Bank must support the economy and cut rates by as much as 50 basis points at one go, and even consider deploying macro prudential tools to help those corporates that are experiencing credit and funding stress. ...

SA requires three necessary but not sufficient conditions to propel economic growth from its snail’s pace of the past few years. First, regaining fiscal credibility, which I wrote about in these pages two weeks ago. Second, big-bang structural economic reforms, and lastly continued incentives and policy certainty in mining, land, energy and other areas to attract private sector investment....

The presence of fiscal credibility means that economic agents believe what the fiscal authorities announce as their target primary budget balance, they will achieve in the time frame that they set. South Africa fiscal credibility has deteriorated since the financial crisis, and the risk remains that this could persist if National Treasury continues to miss its budget targets. ...

It is complicated. That’s how one can describe South Africa’s economic outlook for the year given the events of the past three weeks. Encouraging developments globally, though they will not improve our economic growth prospects, and there’s just too much noise locally, devoid of tangible progress on economic reforms tabled by the National Treasury late 2019 as far as implementation is concerned. ...

Many economists, financial pundits and government officials have become too obsessed with minuscule decimal differences in the economic growth of South Africa’s more than three trillion-rand economy. But who should care if the economy grows by the existing consensus expectation of 0.5% in 2019 or by 0.3% that will result if GDP growth is less than 1.0% in the fourth quarter? ...

Stats SA released economic growth figures for the third quarter this week, and told us that the economy contracted by 0.6%, on a seasonally adjusted and annualised basis. This disappointing outcome mean that for economic growth to average at the current consensus expectation of 0.5% in 2019, the economy must expand by a whopping 4.1% in the fourth quarter, which by any imagination seems too far-fetched. ...

This year, global markets have been volatile and domestic developments have been both encouraging and painful. The volatility in markets has been largely driven by chaotic and inward-looking global trade policy, which weakened growth in trade volumes, business confidence and fixed investments, and subsequently weakened economic growth in several key economies....

The economic policies made by the government and the accompanying legislation to enforce it must benefit the majority of the South African public. If it so happens that policy benefits a minority population (intended or unintended), that policy must not make the remaining majority worse off, as it is far easier to address a negative externality on a minority population than on majority.  ...

Finance Minister Tito Mboweni will table the Medium Term Budget Policy Statement (MTBPS) on Wednesday, October 30, wherein it is largely expected that the fiscal trajectory will worsen compared to the February Budget Review. ...