GDP growth rates remain at an all-time low

By Drum Digital
25 November 2015

Because of the absence of significant domestic policy reforms, growth rates are very likely to remain below 2 % of GDP.

By Ayanda Sitole

According to Frans Cronje, CEO of the Institute of Race Relations, because of the absence of significant domestic policy reforms, growth rates are very likely to remain below 2 % of GDP.

The rand, which has lost between half and two thirds of its value every decade since the early 1980s, will maintain that downward trend.

“Despite low growth in South Africa, interest rates will pick up in response to rate hikes in other parts of the world. Weak domestic consumption will temper inflation not withstanding a weakening currency,” he says.

Cronje believes that in a 2 % GDP growth environment with no chance of significant job creation, the expanded unemployment rate will remain at around 35 % — dampening both changes in GDP levels and the real disposable income of households.

“Misguided labour policies and continued hostility to capital investment will see the structure of GDP advancing in favour of the more high-tech, high-skilled tertiary sector of the economy,” he says, “What is most concerning is that there is little chance of an export-driven economic recovery in the current policy climate.”

Cronje concludes that exports of ‘goods and services’ will continue to lag behind other areas of expenditure on GDP. This effect will be pronounced in the absence of a commodities comeback.

“There is of course a way out of this crisis,” he says, “that is for the Government to again embrace the liberal conservatism of the Growth Employment and Redistribution (GEAR) strategy.”

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