A Macroeconomic Perspective

1
A Macroeconomic Perspective on Budget 2003

Hearings on the Appropriation Bill (Budget
2003/4) The Parliament, Cape Town March 5, 2003
Dr Iraj Abedian Director Group Economist
2
Presentation outline

• A global economy perspective
• A national economy perspective
• The 2003 Budget its major macroeconomic aspects
• Concluding remarks

3
A global perspective
4
Major economies in trouble
Real GDP growth in 2002 q/q, seasonally
adjusted and annualised
Source Bloomberg
Source Statistics South Africa
5
RSA likely to outshine majors
Projected real GDP growth y/y
South Africa
Source IMF World Economic Outlook, September 2002
Source Standard Bank Economics Budget 2003
6
Balance of Payments in healthy state
Current account balance as a of GDP
Source OECD
Source SARB Quarterly Bulletin
7
Global fiscal pressures on the rise
General government financial balances Surplus ()
/ deficit (-) as a of GDP
Source OECD
Source Various National Budgets
8
Global government debt rising! ( of GDP)
General government gross financial liabilities
Source OECD
9
US falling compared to majors Rand..
Index January 2000 100Falling index equals US
appreciation
EURO/US
GBP/US
US/JPY
US/ZAR
2000
2001
2002
2003
Source Bloomberg, Standard Bank Economics
10
US falling compared to select minors
Index January 2001 100Falling index equals US
appreciation
PZL
AUD
ZAR
BRL
2001
2002
2003
Source Bloomberg, Standard Bank Economics
11
A national economy perspective
12
Secular turn in RSA GDP growth
per annum
Turning point
Forecast
1970s
1980s
1960s
1990s
2000s
Source Statistics South Africa Standard Bank
Economics
13
SAs rising economic resiliencePillar One
Reinforced by Structural Changes, South
Africas Economic Efficiency is rising
14
Structural changes have transformed the economy.
share of total GDP
Source SARB Quarterly Bulletin Statistics South
Africa
15
SAs rising export levels rising competitiveness
Total exports to GDP
Competitiveness rankings
Source SARB Quarterly Bulletin
Source World Economic Forum
16
SAs rising economic resiliencePillar
TwoSAs export diversification paying off
17
South Africas declining dependence on
commodities, amid increased export orientation
Export/GDP ratio
AverageQ1-Q3
18
Increased manufacturing orientation of SA Exports
Shares in total exports, 1995 prices
Manufacturing
Mining
1991-1995
1996-2000
Source TIPS
19
SAs rising economic resiliencePillar
Three Macroeconomic Stability Solid Fiscal
Conditions
20
SA real GDP rising fixed investment
Percent change q/q, seasonally adjusted and
annualised
Gross fixed investment
Household consumption expenditure
Government expenditure
GDP
2000
2001
2002
Source SA Reserve Bank
21
Inflationary Trends Declining
Secular downtrend temporarily restrained


Forecast
PPI
CPI
CPI
PPI
2002
2000
2001
2003
80
82
84
86
88
90
92
94
96
98
00
02
Source Statistics South Africa, Standard Bank
Economics
22
SAs declining interest rates outlook
Percent per annum

• Real prime forecast based on updated
• CPIX forecasts and current Alt 2
• interest rate outlook

Nominal prime
Forecast
CPIX
Real prime -deflated by CPIX
23
SAs attractive yield draws inflows
RSA nominal interest rates
Real interest rates


Source SBSA (EcoServ)
Source IMF World Economic Outlook, Consensus
Economics SBSA
24
Emerging markets comparison short-term interest
rates GDP (Q3/02, Y/Y)
25
ZAR against primary currencies
Index January 2000 100Falling index equals
rand depreciation
Euro/ZAR
ZAR/JPY
GBP/ZAR
US/ZAR
R13/86/ on 20 Dec 2001
2000
2001
2002
2003
Source Bloomberg, Standard Bank Economics
26
SAs rising economic resiliencePillar Four
Deepening Democracy Social Stability