THE nation’s economic managers have decided to lower the country’s economic growth targets in view of “new realities” in both the international and local economic situations, following a meeting of the Development Budget Coordinating Committee.
The changes were agreed upon in response to global developments, notably the rising oil prices and the escalating trade war between the United States and China. Domestically, oil prices have risen in response to the world developments, and also because of the effects of the new taxes imposed by the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
The economic managers decided to lower the Gross Domestic Product (GDP) growth target for 2018 to 6.5 to 6.9 percent, from the previous target of 7 to 8 percent.
But the higher target of 7 to 8 percent will remain for now in the coming years from 2019 to 2022. To achieve this, the government will push agricultural development through high-value crops and greater use of technology, more investments in manufacturing, timely implementation of construction projects, the entry of a new telecom firm, sustainable tourism, and completion of master plans for transport and other programs. This is the supply side of the economic equation.
The government will also seek to encourage more investments, local and foreign, through the nationwide “Build, Build, Build” infrastructure program.
On the demand side, the government will seek to increase household consumption and expand social aid programs.
Most people may not be able to grasp all these figures on economic targets, but they will understand and appreciate the government’s plans for increased household consumption – which simply means enabling more people to buy more goods for their household needs.
We are still in the middle of the period of rising prices, which began last January when global events led to lowering of the world oil supply and thus the rising of prices. Coincidentally, the TRAIN excise tax on diesel and other fuel began at the same time. The government has now decided to suspend this tax of R2 per liter of fuel, starting in January, 2019.
The government was able to collect R33.7 billion from this tax in the first half of 2018; the total collection will each R63.3 billion by year’s end. It has now decided to forego collection of this tax for the first three months of 2019. This should be a big factor in limiting domestic price increases next year, even if global oil prices continue to rise.
There is great hope that the great problem of high prices – inflation to economists – is on the way to being solved. The immediate action of suspending the fuel tax, plus our economic managers’ plans on GDP, for agricultural growth, investments, manufacturing, transportation, infrastructure, and other aspects of the national economy should serve to reassure the nation that the difficulties we are now undergoing will soon be over.
