South Africa: Macroeconomic Perspectives for the Medium Term

This paper explores the macroeconomic situation and medium-term perspectives of the South African economy. Three scenarios are presented. The medium-term base run scenario illustrates that government consumption can be expanded from 21.0 percent to 21.8 percent of GDP under moderately optimistic assumptions about the future. In addition, the public investment programme is on average equal to about one-fourth more than the public investment programme in the base year. It is therefore concluded that there is room to start addressing the needs of poor South African people directly without disturbing macroeconomic balances. Two alternative scenarios demonstrate that the medium-term future can easily turn out differently. The optimistic scenario involves a higher growth path made possible by increased exports and more savings and investment. The pessimistic scenario, on the other hand, illustrates that if access to foreign borrowing becomes more stringent and real resource inflows and growth falter, not even considerable moderation will be sufficient to maintain domestic macro balances. Bibliogr., notes, ref., sum.