Abandon fiscal tightening
The government has been advised to increase spending in an effort to stimulate the economy, according to independent analyst Mally Likukela.
He believes the government's best hope of staving off the effects of slowed growth, which could cause a recession, is to spend more money.
“The only hope for a speedy recovery is for the government to increase spending in a way that averts layoffs, creates jobs and puts money in the pockets of ordinary people,” said Likukela.
He added: “The dismal performance was largely on account of austerity measures which saw a number of capital projects put on hold and eventually sent the construction sector to its knees, taking along the entire economy.
“In our view, there's no chance consumers will soon be able to rescue the economy.
“The only hope for a speedy recovery is for the government to increase spending in the right ways.”
Ratings agencies Fitch and Moody's have on various occasions raised their concerns regarding the fiscal deficit, which did not help the GDP-to-debt ratio subside.
Likukela was of the opinion that the government should not have immediately heeded the call of these agencies.
“It is our considered view that we believe government could have made a terrible mistake switching its attention from jobs and growth to deficit reduction and as a result the country is now suffering the consequences,” he said.
He was also not confident that the private sector would come to the party, saying that he did not see enough demand to entice investment.
“The biggest question on everyone's mind is the duration of this recession.
“It's no longer so much about the impact of the recession, but how long before the economy recovers. Given the prevailing fiscal consolidation, all eyes are focused on private consumption to rescue the economy,” said Likukela.
“With the economy slowing and the government focused on deficit reduction, it's unlikely that these big corporations, not to mention still struggling SMEs, will invest more and increase spending locally,” he noted in his assessment.
While the government's intentions are all good and well, Likukela argued that it exacerbated an already vulnerable situation.
“Pursuing fiscal consolidation while the economy is weak hurts the economy more. Instead of helping, it makes the deficit worse.
“As unemployment rises and corporate profits shrink, so do tax revenues. What is needed right now is for the government to start spending more, but wisely,” concluded Likukela.
OGONE TLHAGE
He believes the government's best hope of staving off the effects of slowed growth, which could cause a recession, is to spend more money.
“The only hope for a speedy recovery is for the government to increase spending in a way that averts layoffs, creates jobs and puts money in the pockets of ordinary people,” said Likukela.
He added: “The dismal performance was largely on account of austerity measures which saw a number of capital projects put on hold and eventually sent the construction sector to its knees, taking along the entire economy.
“In our view, there's no chance consumers will soon be able to rescue the economy.
“The only hope for a speedy recovery is for the government to increase spending in the right ways.”
Ratings agencies Fitch and Moody's have on various occasions raised their concerns regarding the fiscal deficit, which did not help the GDP-to-debt ratio subside.
Likukela was of the opinion that the government should not have immediately heeded the call of these agencies.
“It is our considered view that we believe government could have made a terrible mistake switching its attention from jobs and growth to deficit reduction and as a result the country is now suffering the consequences,” he said.
He was also not confident that the private sector would come to the party, saying that he did not see enough demand to entice investment.
“The biggest question on everyone's mind is the duration of this recession.
“It's no longer so much about the impact of the recession, but how long before the economy recovers. Given the prevailing fiscal consolidation, all eyes are focused on private consumption to rescue the economy,” said Likukela.
“With the economy slowing and the government focused on deficit reduction, it's unlikely that these big corporations, not to mention still struggling SMEs, will invest more and increase spending locally,” he noted in his assessment.
While the government's intentions are all good and well, Likukela argued that it exacerbated an already vulnerable situation.
“Pursuing fiscal consolidation while the economy is weak hurts the economy more. Instead of helping, it makes the deficit worse.
“As unemployment rises and corporate profits shrink, so do tax revenues. What is needed right now is for the government to start spending more, but wisely,” concluded Likukela.
OGONE TLHAGE
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