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MTBPS:
Right mix, right time
Goolam Ballim
Financial Markets Economist
Economics Division
Presentation outline
– Timing
– Policy mix
Synchronised slowdown
GDP, annual percent change
7
Excluding China & India, Dev. country
GDP is likely to be below 2.5% in 2002
6
Developing countries
5
4
3
2
World
South Africa
USA
1
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Room for fiscal stimulus
General government fiscal balance, % of GDP
2
0
-2
United States
Advanced economies*
-4
-6
South Africa
Developing countries
-8
-10
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
* United States, European Union & Japan
Global disinflation
%
%
12
60
10
50
8
40
South Africa
6
4
2
USA
Developing countries - right scale
Advanced economies*
0
30
20
10
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
* United States, European Union & Japan
Global monetary easing
Central bank rates, % per annum
11 Sept
20
18
16
14
12
South Africa
10
8
United States
6
4
United Kingdom
EMU
2
Japan
0
1999
2000
2001
Policy mix
Policy mix
– Major drivers of growth:
1) private sector & government capital spending;
Capital formation
Net capital formation by organisation 1991 to 2000
Rand millions, nominal values
200000
150000
100000
50000
0
-50000
General
government
Public
corporations
Private business
enterprises
Real gross fixed capital
formation
Quarter-on-quarter percentage change
Seasonally adjusted at annual rate
30
20
Private sector
10
0
Total
-10
-20
-30
1996
1997
1998
1999
2000
2001
Policy mix
– Major drivers of growth:
1) private sector & government capital spending;
2) declining interest rates;
•
SARB to lower rates further
SA likely to sustain
disinflationary trend
•
Supported by:
•
1. Slow growth in
nominal labour costs,
due to moderate wage
increases and brisk
productivity growth
•
•
2. Continued
liberalisation of SA
economy
Percentage change year on year
25
20
Prime lending rate
15
10
5
CPIX
3-6% inflation target
0
3. Excess capacity
over aggregate
demand
1998
1999
2000
2001
2002
Policy mix
– Major drivers of growth:
1) private sector & government capital spending;
2) declining interest rates;
3) declining tax rates;
Tax burden
General government tax revenue, (% of GDP)
– Easing tax
burden over the
coming years,
particularly for
individuals
27.0
26.0
25.0
24.0
23.0
22.0
21.0
1996
1997
1998
1999
2000
2001
Policy mix
– Major drivers of growth:
1) private sector & government capital spending;
2) declining interest rates;
3) declining tax rates;
4) consistent export drive and export diversification;
GDP & GDE
Quarterly change, seasonally adjusted and annualised
10
5
0
-5
-10
GDP
GDE
-15
1997
1998
1999
2000
2001
SA’s declining dependence on
commodities amid increased exports
Resources and net gold exports as a percentage of total exports
50
Exports to GDP
Resources exports
Net gold exports
45
40
35
30
25
20
15
10
5
1996
1997
1998
1999
2000
2001
Policy mix
– Major drivers of growth:
1) private sector & government capital spending;
2) declining interest rates - long- and short-term rates;
3) declining tax rates;
4) consistent export drive and export diversification;
5) macroeconomic stabilisation and policy credibility.
Policy mix
– Major drivers of growth:
1) private sector & government capital spending;
2) declining interest rates - long- and short-term rates;
3) declining tax rates;
4) consistent export drive and export diversification;
5) macroeconomic stabilisation and policy credibility.
– Low dependency on FDI reduces the probability of severe
economic slowdown.
FDI Stocks
$ billion
1400
Africa
1200
Latin America & Caribbean
1000
Asia & Pacific
800
South Africa
600
400
200
0
1980
1985
1990
1995
1999
2000
The end
[email protected]
www.ed.standardbank.co.za
Economics Division