#2  The SA economy – is the growth problem cyclical or structural? - Brian Kantor

The SA economy is performing very poorly- and the prospects of faster growth seem remote. The reason for persistently slow growth are cyclical and structural. The business cycle, reflects unhelpful global forces to be identified including the impact on the exchange value of the ZAR. A weak rand means more inflation and higher interest rates that slow down the economy. Though, as will be explained, the Reserve Bank could have done a much better job of managing exchange rate and other inflation shocks beyond its control. The prospects for a rand recovery will be fully considered on which any hope of a cyclical recovery of the economy will depend.  A rand recovery will also depend on how well SA manages its fiscal policy – and by so doing realises an improved standing in credit markets. Cyclical forces will dominate the short term outlook for the SA economy. Structural reforms are called for to raise the long term potential of the SA economy. I will outline the structural reforms that would make a difference over the longer run.