South Africa: Macroeconomic challenges after a decade of success1

Jeffrey Frankel, Ben Smit and Federico Sturzenegger

The Economics of Transition, 2008, vol. 16, issue 4, 639-677

Abstract: More than halfway through the decade, the South African economy has done very well. This report asks whether such achievements provide grounds for complacency. In particular it discusses the current account challenge in light of the Accelerated and Shared Growth Initiative for South Africa (ASGI‐SA) program. Our assessment is that a cautionary note on the need to reduce external imbalances is needed. We provide policy recommendations to minimize the negative impact of a possible sudden stop of capital inflows. On the consistency of ASGI‐SA program, we note that, given South Africa's recent employment and productivity performance a large investment program would be required to deliver the desired growth rates. In our view this imposes a large burden on public investment and on the current account itself.

Date: 2008
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