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South African economy

When are macroeconomic stability and exceptionally high returns not enough for private investors?

Sandeep Mahajan's picture

South Africa appears to be mired in a cycle of modest growth, high inequality and record unemployment. This, despite an exemplary record on macroeconomic management and deepening integration with the global economy. 

Inflation remains nestled within the target range of 3-6 percent and fiscal and debt management outcomes have been impressive.

Remarkably, there is broad political consensus on the issue of macroeconomic stability, recent calls for a looser stance by the labor unions notwithstanding. 

A sustained pattern of high, broad-based and inclusive growth is yet to emerge, however.  Despite a pick-up in per capita GDP growth from negative rates to an average of 1.6 percent per year during 1994-2011, per capita GDP is currently only 10 percent higher than in 1980: a period over which other developing countries have seen much more meaningful increases in their income levels.

Since When Does an Improvement in the Trade Balance Signal Economic Recovery?

Sandeep Mahajan's picture

Something is  not quite right with this picture.

There has been somewhat of a celebration lately in the South African press and markets, sparked by news that the external trade balance was moving into positive territory following several months of trade deficit.

The fact that three consecutive months of trade surplus (May-July 2009) were recorded for the first time in 6 years has made it even more special. Market analysts have exulted that “South Africa's economy was likely to recover as the balance of trade improved," [which] "underscores our bullish outlook for the current account deficit." The positive mood further whetted the appetite of foreign investors, who have poured more than $7 billion into the Johannesburg Stock Exchange in 2009 thus far, bolstering the Rand to a one-year high against the US Dollar by end-August.