As proof that an economy’s currency exchange rate can react
strongly to economic news from government officials, South Africa’s currency
plunged sharply this week when the government’s finance minister described the
economy as “moribund”—stating that it was not growing enough. The government
gave a forecast this week that South Africa’s GDP would increase just
0.7% this year compared with the 1.3% percent forecast made in the national
budget plan in in February. One major reason the economic growth rate is so
slow in South Africa, according to economic news reports, is that investment
has not been strong enough. [C + I + G + X – M = GDP]
And investment by businesses is low
because businesses are worried about political instability in the country. The
country’s president, Zuma, has been involved in many political corruption
scandals including an accusation that he stood by as large amounts of money were
taken from state owned companies. These development have contributed to
businesses losing confidence in the future of the economy. Making matters
worse, the slower growth rate of the economy is expected to increase the budget
deficit, now expected to rise to 4.3% up from just over 3%.
https://www.bloomberg.com/news/articles/2017-10-28/south-africa-s-deputy-president-says-new-plan-needed-for-economy
They would probably get more investment if the government cleared the name of their President, they could also do it by offering more incentives for businesses to invest in the country. It will be interesting to see how the administration reacts.
ReplyDeleteI know the safe condition (war) in a country will decline the investment in that country. But I have never thought that the ruling party's corruption will also reduce the investment in that country. It is interesting to know that the ruling party's degree of integrity can affect that country's investment.
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