economics division

Economics Division

Goolam Ballim

Financial Markets Economist

MTBPS:MTBPS:Right mix, right timeRight mix, right time

Presentation outline

– Timing

– Policy mix

Synchronised slowdown

0

1

2

3

4

5

6

7GDP, annual percent change

1995 19961993

Developing countries

1994

Worl

d USASouth Africa

1999 20001997 1998 2001 2002

Excluding China & India, Dev. country

GDP is likely to be below 2.5% in 2002

* United States, European Union & Japan

Room for fiscal stimulus

-10

-8

-6

-4

-2

0

2

1995 19961993 1994 1999 20001997 1998 2001 2002

General government fiscal balance, % of GDP

Developing countries

Advanced economies*United States

South Africa

Global disinflation

0

2

4

6

8

10

12

0

10

20

30

40

50

60%

USA

South Africa

* United States, European Union & Japan

1995 19961993 1994 1999 20001997 1998 2001 2002

Advanced economies*

%

Developing countries - right scale

0

2

4

6

8

10

12

14

16

18

20

Global monetary easing

2000 20011999

Central bank rates, % per annum

South Africa

United KingdomUnited States

EMU

11 Sept

Japan

Policy mix

Policy mix

– Major drivers of growth: 1) private sector & government capital spending;

Net capital formation by organisation 1991 to 2000

Capital formation

-50000

0

50000

100000

150000

200000

Generalgovernment

Publiccorporations

Private businessenterprises

Rand millions, nominal values

Quarter-on-quarter percentage change

Seasonally adjusted at annual rate

Real gross fixed capital formation

-30

-20

-10

0

10

20

30

Private sector

Total

2000 20011999199819971996

Policy mix

– Major drivers of growth: 1) private sector & government capital spending;2) declining interest rates;

• SA likely to sustain disinflationary trend

SARB to lower rates further

• Supported by:

• 1. Slow growth in nominal labour costs, due to moderate wage increases and brisk productivity growth

• 2. Continued liberalisation of SA economy

• 3. Excess capacity over aggregate demand

0

5

10

15

20

25Percentage change year on year

CPIX

Prime lending rate

3-6% inflation target

2000 20011998 1999 2002

Policy mix

– Major drivers of growth: 1) private sector & government capital spending;2) declining interest rates;3) declining tax rates;

21.0

22.0

23.0

24.0

25.0

26.0

27.0

1996 1997 1998 1999 2000 2001

Tax burdenGeneral government tax revenue, (% of GDP)

– Easing tax burden over the coming years, particularly for individuals

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;

-15

-10

-5

0

5

10

GDP GDE

Quarterly change, seasonally adjusted and annualised

1997 20011998 1999 2000

GDP & GDE

5

10

15

20

25

30

35

40

45

50

1996 1997 1998 1999 2000 2001

Exports to GDPResources exportsNet gold exports

Resources and net gold exports as a percentage of total exports

SA’s declining dependence on commodities amid increased exports

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

0

200

400

600

800

1000

1200

1400

1980 1985 1990 1995 1999 2000

Africa

Latin America & Caribbean

Asia & Pacific

South Africa

$ billion

Economics Division

gballim@mail.sbic.co.za

www.ed.standardbank.co.za

The end