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The growth in real gross domestic expenditure accelerated from 1.6 per cent in 1993 to 6.5 per cent in 1994, before it slowed down to 5.2 and 1.5 per cent in 1995 and 1997, respectively. For the calendar year 1998, the growth in real gross domestic expenditure receded further to an estimated 1 per cent. The slow-down in aggregate domestic expenditure in 1998 resulted from a more cautious inclination towards current spending by private households and general government, and sizeable cutbacks in inventory investments. By contrast, the growth in real gross domestic fixed investment remained relatively strong in 1998. Total real private consumption expenditure rose at a year-on-year rate of about 4 per cent in 1996, but then slowed down to 2 per cent in 1997. There was a progressive slow-down in 1998 through to the third quarter, and it then stagnated in the fourth quarter. The slower growth in real outlays in consumer goods and services was evident in the main categories of this spending aggregate and can be attributed, inter alia, to slower growth in real personal disposable income. This was mainly the result of declining employment levels, a slow-down in gross income of farmers, higher tax collections from households and an acceleration in the deflator for private consumption expenditure to a level that was roughly equal to the rate of remuneration settlements. Furthermore, consumer confidence might have wavered towards the end of 1997 and into 1998 as household debt ratios increased and property and equity values tended to stagnate or decline. This has ostensibly reduced the net worth of households and lowered the resources perceived by households to be at their disposal. Real consumption expenditure by the general government decreased from 7 per cent in 1997 to 4 per cent in 1998. All three spheres of government contributed to the high growth rate in 1997, but expenditure by provincial governments increased considerably more than that of the central Government and local government. The relatively high increase of 4 per cent in 1998 was due mainly to the statistical carry-over effect of the strong increases in 1997. However, spending containment by provincial governments and limited growth in real personnel remuneration were the main factors responsible for the slow-down in government consumption expenditure in 1998. The growth in real gross domestic fixed investment increased from 3.5 per cent in 1997 to 7.5 per cent in 1998. At annualized rates, growth of 8 per cent in the first quarter, and 11.5 per cent in the second quarter, was followed by a further rise of 14 per cent in the third quarter and 10 per cent in the fourth quarter of 1998. The sustained high increases in capital formation throughout 1998 were caused by an expansion of public-sector (public corporations and authorities) fixed investment. Real fixed investment by public corporations increased by 54 per cent. The growth in private-sector fixed investment declined from 6 per cent in 1996 to 3 per cent in 1997, and declined further to 0.5 per cent in 1998. While fixed capital formation in the agricultural and private manufacturing sectors slowed down, fixed investment in mining, construction and other areas of the business sector remained fairly buoyant. Meaningful expansion took place in the wholesale, retail, catering and accommodation sectors, where new outlets were established and additional capacity created to accommodate a steady increase in foreign tourists visiting the country. There was absolute reduction in inventories in 1998. This decline occurred mainly in the manufacturing, wholesale and retail trade sectors. The general slow-down in domestic demand, as well as the relatively high carrying cost of inventories, encouraged business enterprises to economize on inventory holdings. As a result, the ratio of industrial and commercial inventories to GDP in the nonagricultural sectors of the economy declined from an average of 17 per cent in 1997 to 14,5 per cent in 1998.
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Last Revised: Monday, November 17, 2008 |