Swot South Africa

Topics: Inflation, Consumer price index, Unemployment Pages: 6 (1380 words) Published: May 20, 2010

Price inflation
The steps taken by the Reserve Bank to bring down inflation are working. Inflation was 9.8 in 2008 and to average 4,9% in 2009. Inflation should return to the target range in 2010 (forecast: 6.1) aided by a substantial output gap and the feed through of past rand appreciation. Some factors were still of concern, necessitating continued vigilance in the application of anti-inflationary policy. These included: * high and volatile international crude oil prices

* high grain prices due to adverse weather conditions, low inventories of agricultural goods and higher food prices * uncertainty concerning exchange-rate developments
* salary and wage settlements being significantly in excess of the inflation target range * possible second-round effects of the abovementioned factors * fairly high rates of money supply and private credit-extension growth alongside continued buoyancy in domestic demand conditions * Increases in certain administered prices in excess of the inflation target range. GDP

According to the OECD, Real GDP growth was negative in 2009 : -2.2 , but should turn positive in 2010 :2.7 boosted by the World Cup http://www.oecd.org/publicationanddocuments/0,3395,en_33873108_39418625_1_1_1_1_1,00.htmll |  2009 |  2010 |

Real GDP | -2.2 | 2.7 |
Consumer Prices | 7.2 | 6.2 |
* Source: OECD

Interest Rates = approximately 7%
The most recent consumer price index inflation forecast by the Reserve Bank showed that CPI inflation was still expected to continue its moderate downward trend and to enter the Bank's target range of three to 6% during the second quarter of 2010. It was expected to remain within the target range for the rest of the forecast period ending 2011

Turning to the outlook for inflation, he said the Bank's most recent forecast remained "more or less unchanged" compared with the previous forecast. "However, CPI inflation is still expected to continue its moderate downward trend and to enter the target range during the second quarter of 2010, and to remain within the target range for the rest of the forecast period ending 2011," South Africa| 7.0%| 7.5%| 9|

Diagram http://www.fxstreet.com/fundamental/interest-rates-table/

Exchange Rates

The rand is the currency of the Common Monetary Area between South Africa, Swaziland and Lesotho The rand has the symbol "R", It replaced the South African pound as legal tender, at the rate of 2 rand = 1 pound. The rand was introduced on 14 February 1961 the same year that the Republic of South Africa was established. Today, 1 British pound = 12.0477391 South African rands!!

Less to invest than years ago

South Africa had a well-developed financial system that made it easy for people to enter the financial markets, and unfortunately also easy to move out -- as was happening. One of the major issue is the dubious distinction of having one of the world's most volatile currencies. This should be of serious concern to the country's policymakers.

The country had depended on foreign investors to service the current-account deficit since 1994, attracting only a handful of long-term capital inflows and 90% of a short-term nature.

The risk had been that, if these investors caught fright because of the situation in Zimbabwe, for example, the money being attracted from offshore could flow out overnight -- as was being seen now.

Rand weakness would might hit the country's public service infrastructure projects -- such as those of Eskom and Transnet -- with roughly 40% of their budgets to be spent on imports.

South African markets would remain volatile while the international markets were volatile, but in South Africa's case the ups and downs can be even more pronounced.

Exports Imports
The current account deficit narrows (13.9 in 2009) this year but should widen thereafter as imports outpace exports. The downturn and the attendant large...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Pros and Cons of Currency Strenth in South Africa. Essay
  • Analyses of Emerging Country: Africa Essay
  • South Africa Essay
  • South Africa Essay
  • Economics Challenges of South Africa Essay
  • Strong or Weak Currency for South Africa? Essay
  • Economics: South Africa vs. New Zealand Essay
  • Global Tade and the South African Market Essay

Become a StudyMode Member

Sign Up - It's Free