1. A Macroeconomic Perspective on Budget 2003 Dr Iraj Abedian Director & Group Economist Hearings on the Appropriation Bill (Budget 2003/4) The Parliament, Cape Town March 5, 2003

2. Presentation outline  A global economy perspective  A national economy perspective  The 2003 Budget & its major macroeconomic aspects  Concluding remarks

3. A global perspective

4. Major economies in trouble Real GDP growth in 2002 % q/q, seasonally adjusted and annualised Source: BloombergSource: Statistics South Africa

5. RSA likely to outshine majors Projected real GDP growth % y/y Source: IMF World Economic Outlook, September 2002 Source: Standard Bank Economics & Budget 2003 South Africa

6. Balance of Payments in healthy state… Current account balance as a % of GDP Source: OECDSource: SARB Quarterly Bulletin

7. Global fiscal pressures on the rise… General government financial balances Surplus (+) / deficit (-) as a % of GDP Source: OECD Source: Various National Budgets

8. Global government debt rising…! (% of GDP) General government gross financial liabilities Source: OECD

9. 2000 2001 Index January 2000 = 100 Falling index equals US$ appreciation 2002 GBP/US$ EURO/US$ US$/ZAR US$/JPY Source: Bloomberg, Standard Bank Economics 2003 US$ falling compared to majors & Rand..

10. 2001 Index January 2001 = 100 Falling index equals US$ appreciation 2002 AUD BRL ZAR PZL Source: Bloomberg, Standard Bank Economics 2003 US$ falling compared to select minors:

11. A national economy perspective

12. % per annum 1970s1980s1960s Source: Statistics South Africa & Standard Bank Economics 1990s2000s Turning point Forecast Secular turn in RSA GDP growth

13. SA’s rising economic resilience Pillar One: Reinforced by Structural Changes, South Africa’s Economic Efficiency is rising……

14. Structural changes have transformed the economy…. % share of total GDP Source: SARB Quarterly Bulletin; Statistics South Africa

15. SA’s rising export levels & rising competitiveness Total exports to GDP Source: SARB Quarterly BulletinSource: World Economic Forum Competitiveness rankings

16. SA’s rising economic resilience Pillar Two: SA’s export diversification paying off

17. 17 South Africa’s declining dependence on commodities, amid increased export orientation Export/GDP ratio Average Q1-Q3

18. Increased manufacturing orientation of SA Exports 1991-1995 Shares in total exports, 1995 prices 1996-2000 Source: TIPS Mining Manufacturing

19. SA’s rising economic resilience Pillar Three: Macroeconomic Stability & Solid Fiscal Conditions

20. SA: real GDP & rising fixed investment 2000 Percent change q/q, seasonally adjusted and annualised 20012002 Source: SA Reserve Bank Gross fixed investment Government expenditure Household consumption expenditure GDP

21. Inflationary Trends Declining… Source: Statistics South Africa, Standard Bank Economics % CPI PPI 808284868890929496980002 20002001 % CPI PPI 2002 2003 Forecast Secular downtrend temporarily restrained

22. Percent per annum Real prime - deflated by CPIX Nominal prime Forecast SA’s declining interest rates outlook CPIX Real prime forecast based on updated CPIX forecasts and current Alt 2 interest rate outlook

23. SA’s attractive yield draws inflows… RSA nominal interest rates Source: SBSA (EcoServ)Source: IMF World Economic Outlook, Consensus Economics & SBSA Real interest rates %

24. Emerging markets comparison: short-term interest rates & GDP (Q3/02, %Y/Y)

25. 2000 2001 Index January 2000 = 100 Falling index equals rand depreciation 2002 Euro/ZAR GBP/ZAR US$/ZAR ZAR/JPY Source: Bloomberg, Standard Bank Economics R13/86/$ on 20 Dec 2001 2003 ZAR against primary currencies

26. SA’s rising economic resilience Pillar Four: Deepening Democracy & Social Stability