The most powerful and the most developed economy of the continent, South Africa produces one fifth of its entire production. The gross domestic product (GDP) is four times that its southern African neighbours and covering around 25% of the entire continent's GDP. Following the expansion of the global economy, South Africa is acquainted with a real growth rate of GDP of 5%, in 2006 (SARB, 2007: S-148). South Africa's economy has been is an upward phase of the business cycle since September 1999 (the longest period of economic expansion in the country's recorded history). According to Fourie (2001: 89), while the South African economy is relatively strong in the African context, in the world context it is small. Nevertheless, since 2004, GDE has exceeded the GDP, which means that South Africa exports less than it imports. South Africa is living beyond its means To a certain extent, this fact can be explained by a huge growth in the real final consumption expenditure by households.
[...] After briefly presenting a general state of the South African economy performance, we are going to focus on the two main components of macroeconomic policy: the monetary policy and the fiscal policy. The monetary policy The aim of the monetary policy, conducted by the South African Reserve Bank is to ensure economic growth, a high level of employment and a stable average price level. According to the three latest MPC meetings, the level of price is growing each year, as we said in the previous point. [...]
[...] Fortunately, the deficit balance of payments is financed by financial inflows, but has an impact on the decrease of the Rand value (increase in the competitiveness of South African exporters in international markets). Furthermore, according to Fourie (2001: “Owing to the openness of the South African economy, it is extremely vulnerable to external shocks, and foreign factors often dominate the economic news.” The growth of the GDP is also explained by a strong increase in government expenditure (SARB, 2007: S-74) and an expansion of investment in the last few years (GDP = C + I As the SARB mentions (2007: an example of important government expenditure could be the purchase of a new submarine in the South African defence. [...]
[...] Department of Economics. University of the Free State, Bloemfontein, South Africa. Burger, P The basic model: The foreign sector. Business Conditions Analysis: MMB 720. University of the Free State, Bloemfontein, South Africa, 29th August 2007. Burger, P Fiscal policy in South Africa. Business Conditions Analysis: MMB 720. University of the Free State, Bloemfontein, South Africa, 29th August 2007. Burger, P. 2007.The real sector and [...]
[...] The fiscal policy The stimulatory fiscal policy of South Africa can be analysed in distinguishing the three basic instruments: government expenditure, taxation and government borrowing Government expenditure With the growth of the South African population, the extension of the democracy, the increasing urbanisation, the pursuit of equal educational opportunities, Fourie (2001: 280) shows us that aggregate expenditure in the country will continue to increase. According to the South African Reserve Bank (2007: S-104), government spent more than millions Rands in 2006, i.e of national expenditure as percentage of GDP. [...]
Online readingwith our online reader
Content validatedby our reading committee