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How South Africa is weathering the economic storm
Economist Johan Botha of Standard Bank takes a look at how South Africa is weathering the economic storm since we became embroiled in the most severe economic downturn in decades.
There were great hopes in early 2008 that South Africa would be able to avoid the worst of the global recession. Those hopes were dashed in the last quarter of 2008 as the financial crisis turned truly global in its impact. South Africa, like the rest of the world, became embroiled in the most severe down turn in decades.
This country is however likely to weather the storm somewhat better than the developed countries of the world because of some structural strengths, such as its overall debt situation and the trade relations it has with some Asian countries.
This is according to Standard Bank economist Johan Botha , who says that when the economic meltdown happened, South Africa was affected mainly through three channels: credit became scarce on a global scale, capital inflows dipped severely as risk aversion increased and commodity prices declined by half.
The shape of things to come
He says that the shape of the recovery will determine where we are next year and everybody is hoping for a ‘V’ recovery where the sharp downturn of recent quarters is followed by sharp upturn in economic activity.
“Reality though, is that the upturn could be a ‘U’, which will imply that the recession will last somewhat longer. An ‘L’ will be an absolute disaster, while a ‘W’ will bring some hope initially, but the economy may fall back again,” he says.
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