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Outlook for the International & South African Economies

ECONOMETRIX (Pty) Ltd. Outlook for the International & South African Economies. Dr. Azar Jammine Director & Chief Economist. SACE 16 July 2009. Did Bear Market Not Really Begin in 2000?. Loosening Monetary Policy Leads to Asset Inflation. Progressively looser monetary policy

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Outlook for the International & South African Economies

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  1. ECONOMETRIX (Pty) Ltd Outlook for the International & South African Economies Dr. Azar Jammine Director & Chief Economist SACE 16 July 2009

  2. Did Bear Market Not Really Begin in 2000?

  3. Loosening Monetary Policy Leads to Asset Inflation • Progressively looser monetary policy • Inflation in asset prices, not goods prices • First equities, then housing, finally commodities • Tightening of policy in 2005/06 to quell inflation of goods leads to sub-prime crisis

  4. Fortunately, Correlation with Emerging Markets Still Higher

  5. Massive Monetary Stimulus

  6. Global Recession: V-shape, W-shape or Eta-shape? Eta Shaped Outcome?

  7. Double-Digit Wage Increase as Inflation Falls Sharply & Interest Rates are Cut

  8. Why SA Economy Might Be More Resilient Double-digit wage increase as inflation falls sharply Domestic financial institutions not directly exposed to global financial fallout

  9. Domestic Financial Institutions Not Directly Exposed to Global Financial Fallout

  10. Dangers • Banks at risk of generating recession themselves

  11. Why SA Economy Might Be More Resilient • Double-digit wage increase as inflation falls sharply • Domestic financial institutions not directly exposed to global financial fallout • SA has fiscal space to stimulate • Personal tax cuts bigger than last year

  12. SA has Fiscal Space to Stimulate

  13. Why SA Economy Might Be More Resilient • Double-digit wage increase as inflation falls sharply • Domestic financial institutions not directly exposed to global financial fallout • SA has fiscal space to stimulate • Personal tax cuts bigger than last year • Slower growth is relieving many capacity constraints

  14. Slower Growth is Relieving Many Capacity Constraints

  15. Why SA Economy Might Be More Resilient • Double-digit wage increase as inflation falls sharply • Domestic financial institutions not directly exposed to global financial fallout • SA has fiscal space to stimulate • Personal tax cuts bigger than last year • Slower growth is relieving many capacity constraints • SA is unique in hosting 2010 Soccer World Cup • Infrastructural programmes already underway unlike overseas

  16. Infrastructural Programmes Already Underway Unlike Overseas

  17. Inflation: Longer Term Prospects Still Murky

  18. Interest Rates to Fall but not to 2005 Levels

  19. Interest Rates to Fall but not to 2005 Levels

  20. Political Landscape Reassured But Questions Remain Superficially, arguments supporting leftward policy shift are sound, especially after formation of COPE However, many business interests still within ANC ANC leaders only too aware of need to appease international investors (Leads to successful $1.5bn international bond issue) Appointment of Communists to Cabinet gives them a voice Broad church open to debate However, appointing Manuel as Planning Minister responsible to Presidency will curtail power of left Nonetheless, powers & functions of economics cluster ministries still very undefined Left seems intent on depriving Zuma of a free lunch Power play at work between Parliament & Party Zuma has to begin to exercise leadership Ironically, Zuma’s sensitivity to corruption & cronyism allegations could cause him to attack these more vehemently Who knows, Zuma might be just the person to motivate improved education & service delivery?

  21. - The End -

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