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Global Prospects And Their Likely Impact On South Africa

3300 words - 14 pages


Table of Contents
Global prospects and their likely impact on South Africa 1
Strength of the Recovery 2
Developed Countries: 2
Emerging Markets: 2
Risks to the Global Economy 3
Exit Strategy from Policy Stimulus 4
Repair and reform of the financial sector 4
Fiscal Crises and underinvestment in Infrastructure 4
Socio and Political Implications of Unemployment and Private Demand 5
Asset Price Collapse and the risk appetite of investors 5
Return to Previous Growth Path or Not 5
Will the current crises be “DÉJÀ VU ‘” for the world wide economy? 6
Fundamental Changes in Origins & Nature of Economic Activity ...view middle of the document...


In the UK, the Labour government has received good news in the run-up to the elections in May in the form of a drop in the unemployment rate. The number of unemployed people fell by 33,000 to 2.45 million in the three months to January (compared with the previous quarter), which is the lowest level for almost a year and the largest decline over a three-month period for almost three years.
Average weekly earnings also increased during the three-month period up to January 2010, namely by 1.4% (compared to a year ago), up slightly from 1.2 per cent in the quarter to December. (Roelof Botha – Macroeconomic report)

Emerging Markets:
Several emerging market economies are expected to return to pre-recession growth trajectories during 2010, with China and India having defied the global economic downturn altogether.
China has been leading the pack of a growing number of emerging markets that are rapidly closing the GDP gap between developing nations and post-industrial economies.
In mid-March, The World Bank raised its growth forecast for China for 2010 to 9.5%. In November last year, the bank’s forecast for 2010 growth was 8.7%. Other forecasting agencies are even more optimistic, with the OECD forecasting growth of 10.2% in 2010, dropping marginally to 9.3% in 2011. (
According to provisional estimates by the IMF, India’s GDP recorded a real growth rate of 5.4% in 2009 and the forecasts for 2010 & 2011 are 6.4% and 7.3%, respectively.
The country’s real GDP growth rate during the 2008/09 fiscal year was 6.7% and the official forecast for the new fiscal year has recently been revised upwards from 7.2% to 8.8%. These figures demonstrate that India has been developing the same kind of critical mass of broad-based economic development and growth that has characterised China’s economy over the past decade.
India enjoys an investment rate of close to 40% of GDP. Such a high rate of investment could deliver growth of more than 10% per annum, since India’s output per head (at purchasing power parity) is roughly a fifteenth of that of the US. (

This recession showed us just how integrated and interconnected the world’s economies are today. Systemic risk as defined by the World Economic Forum is “the potential loss or damage to an entire system as contrasted with the loss to a single unit of that system. Systemic risks are exacerbated by interdependencies among the units often because of weak links in the system. These risks can be triggered by sudden events or build up over time with the impact often being large and possibly catastrophic”. Under sway from reports from the IMF and the World Economic Forum (WEF), we outline the following as the most significant risks to the global economy in the next five years:
1. Exit strategy from support stimulus
2. Repair and reform of the financial sector

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