Robust injection or damp squid? * 07/16/96 Budget 2002 Robust injection or damp squid? Economics Division *

All fall down GDP, annual percent change Developing countries World * 07/16/96 All fall down GDP, annual percent change Excluding China & India, Dev. country GDP is likely to be below 3% in 2002 Developing countries World South Africa USA 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 *

Global downturn bites Gold exports Merchandise imports * 07/16/96 Global downturn bites Quarter on quarter, seasonally adjusted, at 1995 prices Gold exports Merchandise imports SA mirror’s slump in global trade Merchandise exports 2000 2001 *

Room for fiscal stimulus * 07/16/96 Room for fiscal stimulus General government fiscal balance, % of GDP United States Some are better placed to cushion downturn Advanced economies* South Africa Developing countries 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 * G7 nations *

Household consumption expenditure Q/Q, saar, at 1995 prices % per annum HCE - left scale Prime interest rate (inverted) Falling interest rates help buoy spending 1997 1998 1999 2000 2001

Ratios of household spending and its determinants 1999 Moderate growth in household spending... Household consumption expenditure to GDP Employees compensation to GDP Household debt to disposable income 2001 2000 … as income growth eases … partly financed by debt ...

Risk of wage spiral Nominal remuneration per worker 9.1 8.4 * 07/16/96 Risk of wage spiral Annual percentage change Upward wage pressures ... Nominal remuneration per worker 9.1 8.4 Productivity 7.0 … and easing productivity … 6.0 4.8 4.0 Nominal unit labour costs … equals accelerating unit labour costs 3.4 2.9 2.9 1999 2000 2001* *data point refers to first half of 2001 *

Tightening monetary bias * 07/16/96 Tightening monetary bias Percentage change year on year Prime lending rate Inflation and interest rate risk weighted towards the upside Out of target CPIX inflation target 1998 1999 2000 2001 2002 *

Net capital formation Nominal rand millions, 1991-2000 * 07/16/96 Net capital formation Nominal rand millions, 1991-2000 Combined 11% increase forecast over the MTEF period, but it’s off a low base *

Government capital investment to current expenditure ratio * 07/16/96 Government capital investment to current expenditure ratio Percentage, as at 31 March, consolidated general government Will rise over the MTEF period 85 87 89 91 93 95 97 99 01 *

Real gross fixed capital formation * 07/16/96 Real gross fixed capital formation Q/Q, seasonally adjusted at annual rate Investment across most sectors Private sector 1996 1997 1998 1999 2000 2001 *

Real interest rates Still high historically 90 91 92 93 94 95 96 97 98 * 07/16/96 Real interest rates Percentage per annum Deflated by CPI Still high historically Deflated by CPIX 90 91 92 93 94 95 96 97 98 99 00 01 *

Profit squeeze Producer prices Limited pass-through to consumers * 07/16/96 Profit squeeze Percentage change year on year Producer prices Limited pass-through to consumers Consumer prices 1999 2000 2001 *

Profit slump Reduced scope for investment 90 91 92 93 94 95 96 97 98 * 07/16/96 Profit slump Percentage change year on year Gross operating surpluses Reduced scope for investment 90 91 92 93 94 95 96 97 98 99 00 01 *

Investment and saving Gross savings to GDP * 07/16/96 Investment and saving Gross savings to GDP Gross fixed capital formation to GDP 90 91 92 93 94 95 96 97 98 99 00 *

The end gballim@sbic.co.za www.ed.standardbank.co.za * 07/16/96 The end gballim@sbic.co.za www.ed.standardbank.co.za Economics Division *