South Africa: Macroeconomic Perspectives for the Medium-Term

This paper explores the macroeconomic situation and medium-term perspectives of the South African economy. Three fully quantified and internally consistent scenarios are presented. The projections demonstrate that there is room for increased public spending in real terms to help address South Africa's pressing social needs. Moreover, such expansion is possible without falling into a much feared debt trap, provided moderately optimistic assumptions about the future materialize. Yet, if growth and real resource inflows falter, not even considerable moderation will be sufficient to maintain macro-economic balance and avoid unsustainable public sector deficits.