South Africa has achieved a level of macro-economic stability not seen in the country for many years. Such advances create opportunities for real increases in expenditure on social services, and reduce the costs and risks for all investors, laying the foundation for increased investment and growth. By 2007, the economy was stronger than at any time over the past 20 years.
The South African government has achieved significant successes in ensuring macro-economic stability, via the implementation of macro-economic policies directed at promoting domestic competitiveness, growth and employment. The South African economy, prior the global economic meltdown, has been growing substantially; additional jobs have been created, and the pace of the economic expansion has been strengthened by robust investment and domestic expenditure. South Africa’s macro-economic performance over the past 15 years has been characterised by a remarkable improvement in stability, resulting in a considerably improved economic growth rate. The national government deficit decreased from -4.8% of GDP in 1994, to -0.6% in 2008, meaning that over time, the South African government is moving away from spending more than its revenue. The national government debt decreased from 50.4% of GDP in 1995, to 23.8% in 2008, resulting in a reduction in government’s liability over the years.
Global economic activity deteriorated sharply in 2008 and 2009, as the international credit crisis intensified. According to the IMF World Economic Outlook Update (January 2009), global output growth is expected to slow further, from 3.4% in 2008 to 0,5% in 2009, before rebounding to 3.0% in 2010. In several advanced economies, real output is projected to contract in 2009, while economic growth is expected to moderate significantly in emerging-market and developing countries.
Against this backdrop, South Africa has not escaped the effects of the global economic downturn due to its open economy. Despite declining GDP, South Africa is still posting positive growth results but could slide into a recession during 2009.