Transcript Document

Savings:
A macroeconomic
perspective
Presented to the
SASI Roundtable
by
Elias Masilela, National Treasury
26 May, 2005
Determinants of savings
• Income
– MPS rises with rising income
• Social attitudes (thrift)
• Financial institutions for safe deposit keeping
–
–
–
–
Banks
Insurance and pension funds
Building societies
Other institutions
• Rate of return versus costs
• Inflation
• Large consumption and investment expenditure
needs
2
SA’s experience
• Rising marginal tax rates
• High rates of inflation over a long time
• Government dissavings
•
•
•
•
– High recurrent expenditures
Low external savings – sanctions
Periods of negative interest rates
Low economic growth rates
Skewed income distributions
– High dependency ratios
• Rising marginal propensities to consume
– Greater social transfers
• Financial liberalisation
– Credit-financed consumer spending
• Low income levels / unemployment
• Culture – community ties as substitute for formal
3
saving
Why savings are important
40
% o f GDP
A verage annual real GDP gro wth
% change
GDFI as % o f GDP (perio d average)
Savings as % o f GDP (perio d average)
35
10
8
30
6
25
20
4
15
2
10
0
Paraguay
Australia
New Zealand
Mauritius
South Afric a
Sweden
-2
Brazil
Indonesia
Mexico
Turkey
Korea
0
Malaysia
5
4
Saving, Investment and
Growth in SA
Percentage
Selected South African ratios
8
7
6
5
4
3
2
1
0
-1
-2
-3
40
35
30
25
20
15
GFCF to GDP
Gro ss saving to GDP
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
10
GDP gro wth
5
SA and the rest of the world
P ercentage
Gross national savings, in percent of GDP
40
35
30
25
20
15
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
10
So uth A frica
Wo rld
A dvanced eco no mies
Other emerging market and develo ping co untries
6
SA and the rest of the world
cont.
P ercentage
Gross national savings, in percent of GDP
45
40
35
30
25
20
15
So uth A frica
Develo ping A sia
Euro regio n
A frica
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
10
A sian NICs
7
Who saves?
Rand amo unt
Composition of net savings
Ho useho lds
Co rpo rate
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
60000
50000
40000
30000
20000
10000
0
-10000
-20000
-30000
-40000
General go vernment
8
Contributions to domestic savings
% o f GDP
Annual saving performance
15
General go vernment
Ho useho lds
Co rpo rate
10
5
0
-5
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
-10
9
Households
P ercentage
12
65
10
60
8
55
6
50
4
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
40
1984
0
1982
45
1980
2
Saving to dispo sable inco me o f ho useho lds
Final co nsumptio n by ho useho lds to GDP
Debt to dispo sable inco me o f ho useho lds
10
Are we facing a crisis?
• Do savings alone drive growth?
• Is this the only relationship we should worry
about?
– Household vulnerability
• Can we finance the growing current acc
deficit?
• But
• We want higher investment.
• What are the funding options?
11
Growth
P ercentage
Current account, capital flows and growth
10
8
6
4
2
Net direct investment
Current acco unt
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
0
-2
-4
-6
-8
-10
Net po rtfo lio investment
GDP gro wth
12
How have we responded?
• Reduced government dissaving
– Emphasis placed on capital expenditure
• Income tax relief for saving
– Ambiguous
• Stable macroeconomic framework
– Higher growth levels
– Low inflation
• Growth enhancing micro reforms
• BEE
– Deal with high dependency ratios and
underutilisation of resources
• Comprehensive Retirement fund review
• Special initiatives like:
 Retail Bond
 Third tier and dedicated banks legislation
 Post Bank restructuring?
13
Government finances
%of GDP
4
General government saving
2
0
-2
-4
-6
%of GDP
2004
2002
2000
1998
1996
34
General government current expenditure
32
30
28
26
24
22
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
20
1980
1994
1992
1990
1988
1986
1984
1982
1980
-8
14
Graph on government balances
Fiscal balance (% of GDP)
2007/08
2005/06
2003/04
2001/02
1999/00
1997/98
1995/96
1993/94
1991/92
1989/90
1987/88
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
-10
15
Graph on government balances
Primary government balance
3.5
3.0
%of GDP; fiscal year ending 31March
2.5
2.0
1.5
1.0
0.5
2004
2003
2002
2001
2000
1999
1998
0.0
16
Government investment
8
%of GDP
General government investment
7
6
5
4
3
2
1
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0
17
Impact on the consumer and investor
Personal income Cumulative
R billion tax relief
relief
1995
2.0
2.0
1996
2.0
4.0
1997
2.8
6.8
1998
3.7
10.5
1999
4.9
15.4
2000
9.9
25.3
2001
8.3
33.6
2002
15.0
48.6
2003
13.3
61.9
2004
4.0
65.9
2005
6.8
72.7
18
Inflation
Consumer price inflation
Percentage change y-o-y
Headline CP I
Co re CP I
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
20
18
16
14
12
10
8
6
4
2
0
CP IX
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Importance of partnership (1)
• Financial Sector Summit
– Response to rally call of SACP/COSATU
• Red October campaigns
– Shift focus away from access to credit towards broader
financial services, particularly savings
– Noted high costs of services = poor access
– Increase efficiency in delivery of services
• Key objectives
– Access to basic financial services
– Developmental financial institutions
• Cooperative banks
• Dedicated banks
– Deal with discrimination
– Promote savings culture
– Financial Sector Charter
20
Importance of partnership (2)
• Financial sector charter commitments
– Reduction in costs to promote access
– Promoting a transformed, vibrant, and globally
competitive financial sector
– Improving control
– Human resource development
– Procurement
– Social investment
21
Major challenges
• Dichotomous nature of financial sector
–
–
–
–
Race
Geography
Income levels
Institutionalised (Redlining)
• Growth in incomes
– Economic performance
– Employment
• Change in institutional set up
• Leadership of the private sector
– Not legislative
– Will have to be technologically driven
– Reduction of dependency ratios through
empowerment
• Education
22
Premise for Government
policy
• Savings increase with rising income and
profitability levels (consumption function)
– Increase in incomes dependent on growth
• High productivity and competitiveness (+ve)
– Insufficient reinvestments
• Low participation rates (-ve)
– Concerned about high unemployment
23
Implications of poor domestic savings
• Higher cost of capital
• Low investment
• Increased fiscal costs and reduction in
social and economic delivery
• Poor growth
• Increased poverty
• Household vulnerability
24
Is it Government’s responsibility?
• Fundamentally - YES!
– Influence cannot be direct
• However, private sector has a role to
play, it cannot be an observer
• In particular household sector
– managing consumption patterns
25
Role of Government in summary
• Reducing Government dissavings
• Improving the quality of the deficit
– Increasing capital expenditure
– Better service delivery
– Potential to undertake countercyclical fiscal
policies
• Reducing costs of capital
• Reducing taxes to increase disposable
income and reinvestable funds
• Enhancing growth
– Higher investment
– Increased competitiveness
– Higher employment (reduce dependency ratio)
26
THANK YOU
RE A LEBOHA
SIYABONGA
DANKIE
___________________________________
Contacts:
[email protected]
[email protected]
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