MONEY

Mini-Budget Speech 101: Buzzterms You Must Know

Don't be confused by aggressive fiscal expansionary policy.

25/10/2017 06:07 SAST | Updated 25/10/2017 09:34 SAST
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The delivery of a budget speech may feel like an economics evening class on steroids. With the constant mention of debt-to-GDP ratios, fiscal policy objectives, projected economic growth -- you get our drift.

These are terms we believe Finance Minister Malusi Gigaba will use as he delivers the medium-term budget policy statement on Wednesday.

For those who are not as well-versed in these economic terms, it might be a tad overwhelming and intimidating.

However, we've got you covered. Here are five economic buzz words and terms you can expect to hear -- and what they mean:


1. Fiscal

You might hear fiscal, a lot. Fiscal primarily refers to government revenue or "income", collected primarily through taxes and levies.

Fiscal discipline refers to how well and responsibly government manages these funds.

Fiscal deficit occurs when government debt exceeds government's revenue.

Fiscal space then refers to government's "budget room" -- the amount of money it has available to spend.

You might also hear of fiscal consolidation, fiscal policy and fiscal slippage in the budget.

2. Budget deficit

This happens when government's "expenses" exceed its "income" -- much like a person whose salary is just not enough to cover his or her expenses.

Budget deficit is different from national debt, which occurs when the state borrows money to cover the budget deficit.

3. Debt-to-GDP ratio

This is the ratio between how much government owes and its gross domestic product (GDP).

The value of products sold and manufactured, as well as things people do and get paid for in South Africa amounts to the GDP. This means every item or product brought to market by workers or other economic resources located in the country is part of the GDP. Another person could very simply call it the "national income."

The debt-to-GDP ratio then, gives a picture of what South Africa owes versus what it produces or its "national income".

4. Expenditure ceiling

This basically refers to government's "spending limit" -- and so they cannot exceed a certain amount in their expenditure.

This helps strengthen fiscal discipline.

5. Economic growth

Simply, this is a measurement of the change in the country's GDP or "national income".

So if the value of all goods and services produced in the country's economy in a given period of time, normally a year, is higher than the previous year, that can be read as a form of growth.

Economic growth is a great thing because it means more money, as more people are paying tax.