(Adds growth forecasts, market reaction background)
* Revenue down partly on mine strikes, to weigh on growth
* Government to keep spending under wraps
* Growth to lag that of BRICS peers
By Stella Mapenzauswa
CAPE TOWN, Feb 27 South Africa cut its 2013
economic growth forecast due to subdued demand from export
markets and projected a slightly wider budget deficit than
previously forecast because of revenue collection undershooting
In his three-year budget tabled to parliament on Wednesday,
Finance Minister Pravin Gordhan said the budget gap for the
financial year beginning in April would widen slightly to 4.6
percent of GDP from the 4.5 percent forecast in October last
However, the deficit is slightly narrower than the 4.7
percent predicted by economists polled by Reuters earlier this
week, and the 5.2 percent gap projected for 2012/13.
The shortfall was partly to due reduced revenue from the
mining sector, hit by strikes last year that left more than 50
people dead and shaved 15 billion rand ($1.7 billion) of output
in Africa's biggest economy.
Tax revenue for the current year ending in March would
likely be 16.3 billion rand ($1.84 billion) below projections.
In 2013/14 and 2014/15 it is expected to underperform by 13.2
billion rand and 27.8 billion rand respectively.
Gordhan cut the growth forecast for this year to 2.7 percent
from the 3.0 percent earlier seen, partly due to subdued demand
from South Africa's key markets in Europe.
Growth expectations for the next two years have also been
cut, with 3.5 percent seen for 2014 and 3.8 percent expected in
2015, far below the 7 percent growth the government says is
needed to create a significant number of jobs.
"Weak external demand among South Africa's traditional
trading partners has affected exports, particularly for
manufactured goods," the Treasury said.
Domestic consumer demand, which accounts for about 60
percent of GDP, would remain modest as households struggle to
find jobs while existing debt levels remain high.
Growth is also likely lag that of South Africa's peers in
the BRICS group of leading emerging market economies, with China
expecting to expand by 8.2 percent in 2013, while GDP in India
is seen rising 5.9 percent and Brazil by 3.5 percent.
Gordhan said the government, still smarting from credit
downgrades from Moody's, Standard & Poor's and Fitch, would keep
a tight grip on its purse strings, with plans to reduce spending
by 10.4 billion rand.
"The deficit is there because of the revenue loss that we
have experienced, not because of expenditure," the finance
minister stressed at a news conference before his speech to
But President Jacob Zuma's government, which has faced a
series of protests against poor basic services in impoverished
townships, would continue pouring money into infrastructure,
education and health services, he added.
"This government will not get to the point where we impose
austerity on our people," Gordhan said, alluding to fiscal
tightening measures that have triggered violent protests in
countries such as Greece.
The current account would remain under pressure, averaging a
6.2 percent deficit over the next three years and putting
pressure on the rand exchange rate.
The rand weakened to 8.88 against the dollar from 8.835
before Gordhan began his address to parliament and was still
around that level at 1336 gmt.
Government bonds weakened, with the yield on the benchmark
2026 paper jumping to 7.31 percent from 7.235 percent
($1 = 8.8437 South African rand)
(Additional reporting by Xola Potelwa and Wendell Roelf)