South Africa has a low savings rate by international standards, Finance Minister Trevor Manuel wrote on Monday in The Star.

"With a rate of about 15 percent of GDP, we save less than almost every major emerging market economy."

In contrast, China has a savings rate close to 50 percent of national income, while South Korea, Taiwan and Malaysia all had (or had during their growth episodes) rates of around 25 percent to 30 percent of GDP, he said.

In seeking to boost economic growth by raising investment to 25 percent to 30 percent, SA had two simple options. Either the government could take drastic measures to dampen domestic consumption or it could import foreign savings.

"Our best option is therefore to import the capital required to increase investment in the domestic economy.

"This, however, means that we are going to run a current account deficit that is likely to be both large and persistent," Manuel said.

While this might be an acceptable macroeconomic policy, it was not without risk or cost, Manuel added.

Sapa

RSS
Digg
de.li.cious
facebook