http://www.bbc.co.uk/news/business-22180851
South African has started a period of stagflation in which the economic growth is slower than the rate of inflation. These exact numbers being economic growth expected to be at 2.8% and the inflation rate at 5.9%. This period of stagflation is due mostly to the Eurozone's slow down in importing the goods and South Africa being one of their main exports has felt this slow down. This stagflation can be dangerous if it continues to long hopefully South Africa's central bank can figure out how to fix this problem for the continent's biggest and fastest growing economy. The future is bright for South Africa and sub-Saharan Africa as a whole which is purposed to outpace the gobal average of growth for the next three years, hopefully this period of stagflation doesn't taint South Africa's bright future.
South Africa has the potential to grow really fast if it sorts out its political and social problems. Although the central bank has not done a good job in maintaining the monetary policy at a level similar to the economic growth rate, it does not hold the long term solution to South Africa's problems. As the article mentions, there are many problems leading to labor strikes that slow down production. Also the country's over reliance on diamonds and gold exports were definately hurt by the recent slowdown in the foreign markets but the country can use this opportunity to develop its domestic market for some goods. (not necessarily expensive diamonds and jewelry) but maybe its market for household goods. By doing this, South Africa can reduce its over dependence on foreign imports for some of these products.
ReplyDeleteI agree that South Africa has the chance to reduce its dependence, but at the same time, I fear that the theory of 'Dead Aid' is somewhat applicable here. This concept developed by Dambisa Moyo, suggests an inverse relationship between accepting government aid and economic growth & prosperity. She proposed a variety of reason as to why the aid is not helpful at all including aid fueling corruption, encouraging further inflation, increasing civil unrest and increasing the debt load to name a few.
ReplyDeleteInstead, they should focus on opportunities like free trade, FDI and perhaps the infusion of a certain degree of private capital. The main issue here, like America, is the lack of job creation.