The current Economic Situation in SA, India and Germany

Since the successful hosting of the roll mannequin footb on the whole 2010 AS has sustained GAFF at adept downstairs 20%. IN has been spending a plumping portion of its rift on GAFF and this modification magnitude nonwithstanding to a greater extent in 2004 to 2007 when they saw an maturation from al to the highest degree 25% to 33%. GE has filln a gradual disapprove in GAFF however we expect to understand this inhabit at the equivalent score as Germ any continues to invest in renew able energy engineering science and infrastructure. Extrapolating IN and AS GAFF to 2020 we expect to see much the same ratio and a miserable bonnie extrapolation through to 2020 has been apply for both countries. frugalalal theory states that rude savings, made up from the surplus between income and expenditure of households, phone cables length and political sympathies, is used to finance GAFF. The assumption is that these savings be stored in financial institutions and th ese institutions make for the savings to entrepreneurs and avocationes in edict for them to invest in capital. We fecal matter see from Fig. A. 9 in cecal appendage A that the correlation between the harmonize spent by the 3 countries on GAFF is proportional to the countries gross savings.AS savings as a percentage of possible action is exceedingly scurvy in compare to both GE and IN. Although AS can lend bullion in order to fund GAFF which it does this is not an ideal situation. It is essential for a country to logicall(a)y spend on GAFF as it is the capital which grows and sustains any de braverance. The culture in AS is not to save and in order to self-consistently fund capital it is essential for the AS public to choke to save. 12 Fig. A. II in Appendix A indicates military man information index (HID) for AS, IN and GE for the peak 1995 to 2020.The HID is a measurement of lifetime expectancy, didacticsal attainment and income. The take aim explicit by HID i s a p scratch between O and 1 . The human reading index is a measure of equality within a country and a value of 1 would soaked perfect equality ND O would mean perfect inequality. As judge GE the certain country has the highest HID military rank with an average of all over 0. 9 since 2005. AS comes in heartbeat hind end with an average of 6. 19% from 2005 to 2014. AS has one of the dry lands most progressive constitutions and is base on the belief that AS be keen-sighteds to all who live in it.AS is not with show up its equality challenges and un engagement, declining education organisation (WEFT universe of discourse(prenominal) engagement report range AS education as 46th start of 148 countries), high iniquity prescribes (rape in AS is the highest in the realism), and increase curtain raising bow rich and poor. IN score worst on the HID as a dissolving agent of a large cosmos legion(predicate) of whom live in abject poverty. It is however nice to see t hat things in IN argon changing and they take on come a long way since 1995 when they scored simply 0. 4 HID and in 2014 they scored 0. 56 unspoilt less than AS.Extrapolating GE HID to 2020 we SE no reason for any compound and expect to see consistent value that above 0. 9 for the whole boundary 2014 to 2020. Extrapolating AS HID to 2020 we expect the progenys of a less competitive education system coupled with change magnitude unemployment, growing crime ate and increase of the gap between rich and poor to stagnate any improvements and bespeak a possible decrease in the HID for AS over the degree 2014 to 2020. difference in IN is still a problem and we call in harden improvement in HID but until in that location is a unfathomed change oddly in inequality between gender IN is unconvincing to exceed 0. On the HID scale before 2020. 13 3. Conclusion 14 4. References 15 Appendix A 1 1. Introduction This assignment presents a range of frugal variables from 1995 to pres ent day and then extrapo news these variables to 2020. The frugal variables be presented n trine countries South Africa (AS) India (IN) Ger many a(prenominal) (GE). The assignment explains trends and reasons for changes including the interrelationships between the frugal variables, the countries presented, ball-shaped scotch forces and other socio-political sparing incidentors within the specific country universe described.AS is an upper-middle-income, emerging market miserliness and has been so for over 50 years. AS has an abundant supply of immanent picks and a diversified considerably positive miserliness which boasts a utility sector which accounts for more than 65% of append frugal activity. AS has sh proclaim impressive commotion ingathering since it was welcomed back onto the external stage after spending many years in economical isolation from the eternal rest of the world. AS has a functional infrastructure which locomote short predominantly in the s hortage of energy which has contributed to slowing economic suppuration.Eskimo, the AS p arntal position supplier, is building two new mom coal fired agency stations (Medium and Sessile) which were due to come on line in 2012 and when finally completed should relieve the energy crisis AS has faced since 2007. AS faces a number of other challenges which will be discussed in the odd of this assignment. If AS is to escape the middle income trap it inescapably to realism a disruption harvest-festival in excess of 6% for over 20 years. IN has a long history which includes British colonization.After years of passive civil disobedience and resistance to British normal, by the likes of Mahatma Ghanaian, IN finally got its independence in 1947. Economic reforms in 1991 helped IN to average over 6% issue from 1998 to 2014. India has a rapidly under(a) real economy that is well diversified specializing in the IT and business benefit sectors capitalizing on a highly melio localise and skilled workforce. IN has many challenges including a large world many of whom live in abject poverty, regimen corruption and pollution which has caused extensive damage to the environment.GE in impairment of get power parity ( pappa) is the 5th largest economy in the world and boasts the largest economy in Europe. GE is considered a upper-income developed economy and is renowned as a leading machinery, car, chemical and technology merchandiseationer in the world market. GE has a highly productive, highly skilled, technical and well educated population which enables them to remain competitive on the European and global stage. In 1999 GE and 10 other European countries formed the European Union (EX.) and they introduced a common currency called the Euro.GE has committed to decommission all its Nuclear power stations, which account for 25% of Gees power supply, by 2022. GE is investing extensively in renewable resources and is emerging as a world attraction in this sector. 2. Discussion Inflation 2. 1 in that respect be many causes of fanf atomic number 18, we take a look at a a couple of(prenominal) of the causes in the context of the countries in the spotlight Demand factors Rise in ware salutes Exchange pose fluctuations The crude vegetable oil price The damage of apprehend. Fig. A. In Appendix A indicates the average annual puffiness for AS, IN and GE from 1995 to present and extrapolated to 2020. From Fig. A. L, it can be scored that GE a developed country has a very stable largeness set out that is consistently low averaging 1. 56% for the period 1995 to 2014. The prevailing reason for this is that GE has a very strong stable currency and is not undefended to alternate calculate fluctuations. GE too has a very low population growth with an average year on year of -0. 4% for the period 1996 to 2014 which means any increase in take aim for goods from GE has to come room the global market and not within its own borders. The rise in production costs as a result of high labor costs in GE peradventure accounts for the mass of the inflation. GE has to large extent countered inflation by mechanizing production and lessen labor inputs coupled with the fact they have a highly skilled, educated and productive workforce which counters the high cost of labor in GE.Germany inflation is extrapolated, using a moving average calculation, to 2020. Consideration was given to GE stable inflationary history and the strict austerity measures the EX. has chosen since the global ceding back in 2008. In contrast to the stability of inflation in GE, inflation in AS and IN the two evolution countries has been super volatile. Although AS and IN have positive population growth and a growing middle income population which feeds internal demand for goods and services the AS and IN economies remain heavily reliant on the rest of the world.On the 18 July 2014, Gill Markus the SARA governor acclivityd entertain range by 25 sea t points in an get to curb inflation. The hike in interest order should have an sum on reducing inflation as the cost of recognize increases and consumers modify their belts. The extrapolation of the AS inflation data to 2020 is a numeral moving average keeping within the targets set by the SARA of 3-6%. There is a growing risk that inflation is probable to exceed the SARA targets.Due to military press in terms of slow economic growth SARA is unlikely to hike interest order by too much as this would conk economic growth. Business in AS is coming under change magnitude pressure from Labor. MIMIC and NINJA Strikes in the Platinum belt coupled with the watercourse NASSAU strike will inevitably increase the cost of labor which in turn will have a knock on effect on increasing inflation. The NC politics are considering alternate employment development incentives which if successful will help reduce the cost of labor, whet economic growth and reduce inflation.AS is extremel y exposed to crude oil price hikes and exchange rate fluctuations which cause the cost of imported goods to compound with a rise in exchange range. SOLO has the potential to brook a buffer to the oil price and effectuate of exchange rate on landed oil price however they operate on an import parity set model. The competitions commission has handed down glum nines on SOLO and the regulation of the SOLO import parity pricing model is highly likely.This will roll out to the Plastics industry in AS and should have a positive effect on frolic universe of discourse, rase input costs and effectively lower inflation. 2. 2 Economic Growth Fig. A. 2 in Appendix A indicates the gross home(prenominal) product ( geological fault) of three countries AS, IN and GE for the period 1995 to 2020. On the primordial upright piano axis vertebra is billions of international dollars the measure using purchasing power parity (POP) theory which enables us to negate the effects of exchange rates b etween countries and compare perturbation in real terms.The rupture POP measure is interesting in that it shows the relative size of the 3 economies to each(prenominal) other. We can see retributory how small AS is in terms of the bigger players and although this may be disconcerting it is important to remember that AS has the 23 largest economy in the world. On the utility(prenominal) just axis (Fig. A. 2 in Appendix A) we can see the percentage change year on year in GAP. Between 1995 and 2007 AS and IN experienced 3. 6% and 6. 9% growth year on year. GE was not as successful with average growth of only 1. 6% over the same period.Then came he great recession or economic meltdown of 2008/2009 where all 3 countries saw a downturn in GAP especially AS and GE who registered a negative GAP growth in 2009. Inns GAP growth only dipped to Just over 5% in 2009 showing a resilient economy not overly exposed to the rest of the world. In the recovery stagecoach all three countries rec overed well however a second dip in 2011 to 2012 hit IN the hardest and IN dipped to Just under 4% GAP growth in 2012. AS hosted the 2010 FIFE world cup soccer which created large scale infrastructural spending by the government through the recession period helping to boost the AS economy.Extrapolating GAP growth into 2020 for IN in that location is likely to be sustained albeit drawn-out GAP growth. IN has a burgeoning youth who are very well educated, are willing to work for very little and can discourse extremely well in English giving IN a competitive advantage on the global market in the business service sector. IN is however coming under a set of pressure from the Philippines who are competing in similar global markets in the business service and IT support sectors. IN needs to look to new industries in order to sustain its GAP growth.Extrapolating GE GAP growth to 2020 we note that GE has a eclipsing population however with their commitment to renewable resource energy te chnology and the growing emphasis in the world on green initiatives it is likely that Germany will capitalist on this advantage in order to sustain very moderate GAP growth. GE has a responsibility to other EX. countries and the poor performance of other EX. players could curb economic growth in GE. AS has a lot of challenges it needs to overwhelm in order to achieve sustained growth and escape the middle- income economy trap that has been its nemesis for the last 50 years.AS needs to address its labor issues and overcome the growing gap between rich and poor. The world economic forum competitiveness report indicates a host of positive factors which AS can build on however there are a number of shortcomings and AS needs to address these if it wants to continue to grow its economy. Extrapolating AS growth to 2020, it is difficult to foresee the flow AS government under its leadership making any major inroads to solving the macro economic problems that will allow AS to realism large r GAP growth.Coupled to this the fact that AS is highly dependent on China and Europe for economic growth, the outlook for AS is moderate and we could e stagnation or even out a decline in GAP over the next few years. Extrapolating IN growth to 2020, we perceive continued high GAP growth which exceeds 6% annually possibly coming under pressure if the world market does not accommodate this growth and as it comes under increasing pressure from global competition I. E. Philippines. 2. 3 Unemployment Fig. A. In Appendix A indicates the unemployment rates as a percentage of the economically active population in AS, IN and GE. IN has the smallest reported unemployment rate of the three countries with an average over the period 1995 to 2014 of Just under 4%. GE which also boasts a very low unemployment rate has an average of 8. 3% for the same period. AS has an alarmingly high unemployment rate with an average of Just over 24% over the same period. What is most disconcerting is in filthi ness of the fact that AS has shown relatively consistent GAP growth the unemployment rate has continued to grow.The AS government (the NC) is part of a tripartite coalition with COATIS ( conduct union) and the ASAP (communist party). Until this alliance is broken it is unlikely AS will reassessment labor regulations which would make it easier for business to employ more people. According to Eddie Rood, AS does not have an unemployment problem it has an employment problem. In other lyric poem it is too difficult for business to employ people and until regulations are focussed more in favor of the employer than the employee the unemployment rate in AS is likely to consistently increase until 2020.In GE and IN there is likely to be very little change in the unemployment rate shown in the extrapolation which is a weighted moving average extrapolated through to 2020. 2. 4 Exchange judge Fig. A. 4 in Appendix A indicates the average annual exchange rates for AS, IN and GE or the period 1995 to 2020. The indigenous vertical axis indicates IN Rupees exchange rate to the US dollar (use) and the secondary vertical axis indicates Rands and German Marks to the apply. GE which is a developed upper-income country has the least volatile exchange rate and has yielded an average of 0. 3 German Marks and Euro from 2002 to the apply. The IN Rupee and the AS rand, although depicted on different scales, have followed very similar trends indicating the volatility and dependence of developing countries currency on external global economic factors. The AS Rand is under a lot of pressure at present with regular service delivery protests and wildcat strikes like the platinum belt strike and the underway NASSAU metal workers strikes followed by the ASIATIC strike due to mother on Thursday 24 July 2014.Coupled to this poor GAP growth, corruption, lack of service delivery and lackluster leadership from the ruling party is promoting uncertainty and possibly long term negative sent iment. Extrapolation of the exchange rate data for all 3 countries was carried out based on the miff projections on GAP in national currency vided by GAP in dollars. This extrapolation was epitome checked a growst factors that might influence the exchange rate in the form of Inflation, Gold Price, supply and demand for USED and SARA monetary policy.In the case of AS the possibility that AS becomes less attractive to foreign investors and the inflow of USED reduces is highly likely. The net effect of fewer dollars inflow into AS can result in a weaker rand. The SARA has a very strict fiscal policy which pegs the targeted inflation rate in AS at 3 to 6%. Under the watchful eye of Gill Markus the SARA enterprises to curb inflation by easing the Report Rate which is the rate at which the SARA lends bullion to other banks.By raising the Report rate the cost of credit is increased which in turn should reduce demand and with less cash there should be less demand for goods forcing the p rice of goods to come down later on reducing Inflation. If inflation is lowered then the risk of AS goods change state too expensive, (as a result of inflation increasing production costs), on the export market is reduced. AS is the worlds 5th largest Gold producer and grand production and exports account for a large percentage of the inflow of SAID. A change in the price of gold has a large effect on the inflow of dollars which can subsequently lead to a dispraise of the rand.Although the USED is one of the most sought after and used currencies in the world fluctuations in the USED with specific reference to the appreciation of the USED can mean the Rand will depreciate. IN is subject to the same forces as AS with respect to exchange rates and the sum of these forces account for the volatility of the two currencies. A weaker exchange rate promotes local manufacturing due the opportunities to gain higher margins on the international markets. The volatility of the developing coun tries currencies counteracts a large portion of potential growth, due to relative uncertainty and high risk.It would be better if the exchange rate was consistently weak or even if it was consistently strong it would allow for less risk in investments into capital. Extrapolating GE exchange rate to 2020 is easier as the variability is small and we do not expect to see much change in exchange rates from GE as shown on Fig. AAA in Appendix A. In the case of AS and IN extrapolated to 2020 we expect to see a rise in exchange rates and a tapering off towards 2020. both IN and AS will remain exposed to world economic forces and inflows and outflows of portfolio foreign investment. 2. 5 Interest Rates Fig. A. In Appendix A indicates the Interest rates for AS, IN and GE for the period 1997 to 2020. Interest rate refers to a rate which is charged for the use of or loan of notes. The interest rate which is depicted in Fig. A. 5 in Appendix A refers to the rate at which the reserve bank lends to other banks. The interest rate is one of a number of tools used by the reserve banks (central banks) to tighten or relax the monetary policy. The general trend for all three countries is a relaxing of their respective monetary policy in terms of interest rates as we see a big decline in interest rates for the period 1997 to 2014.The expectation with a lower interest rate is that credit is cheaper and gold supply would grow pronto driving economic growth as the demand for goods and services increases and producers pulsate to catch up with demand. Fig. A. L in Appendix A indicates that all three countries have been experiencing positive GAP growth barring the 2008/2009 world economic recession. The effect of pressure on supply of goods and services tends to engender the price up as odds and services become scarcer and consumers are willing to pay more this drives inflation up.The SARA has set targets of 3 to 6% on Inflation as it is a proportional measure of the effects of hik ing or lowering interest rates. The 2008/2009 recession has caused a slower demand for credit and lower interest rates from all 3 countries especially GE with interest rates of well under 1% is an attempt by the Deutsche Bundestag to sack the GE economy. In AS, the SARA has raised interest rates (tightened fiscal policy) in an attempt to curb inflation and keep it within the 3 to 6% targets. The data for the 3 countries is extrapolated to 2020 based on a moving average.In AS the Interest Rate trend from 2014 to 2020 is predicted upwards to as high as 9% in 2020 as AS inflation and exchange rates remain under pressure and the SARA attempts to control the inflation within its targets. In IN the interest rates are predicted to continue to reduce to 2020 to stimulate the IN economy to grow. The pressure on intellectual nourishment sources in India could drive Inflation upwards causing an increase in the interest rates. analogously in GE the interest rates are expected to remain low with a gradual rise from 2014 to 2020.Contrary to the economic recovery plan adopted in USA (economic stimulus plan), GE and its EX. partners have opted for a more conservative approach and austerity measures have caused a slowdown in private spending. In order to fuel the economy and provide cheap credit the interest rates are extremely low yet GAP growth remains slow. Until there is an upturn in the economy interest rates in GE are likely to remain very low from 2014 to 2020. 2. 6 Trade parallelism and Current Account Balance Fig. A. 6. 1 in Appendix A indicates the trade eternal sleep in AS, IN and GE for the period 995 to 2020.The trade equilibrate is calculated by subtracting total import payments from total export earnings including gold and non-gold products. AS and GE are shown in USED on the secondary vertical axis and IN is shown on the primary axis. Trade balances for all 3 countries follow similar trends to the current account balance. The platinum strikes which laste d 5 months will have a negative effect on the balance of trade and subsequently the current account balance. Fig. A. 6. 2 in Appendix A indicates the current account balance in AS, IN and GE for the period 1995 to 2020.The current account includes trade balance and service, income and transfer receipts less service, income and transfer payments. Fig. A. 6. 2 primary vertical axis indicates the IN and AS current account balance in USED. The secondary vertical axis indicates the GE current account balance in USED. We can see that up until 2001 GE was running a marginal current account dearth and how they have turned this deficit into a large current account surplus. Germany is a leading technology supplier and has developed strong trade relations with China and the rest of the world.On the back of the Chinese and world economic growth the Germans have been able to capitalist and show a growing current account surplus. IN and AS who were pretty much break even on current account balan ce up until 2004 have embarked on development strategies. As can be seen in Fig. A. 6. 2 in Appendix A, IN has been a lot more aggressive in borrowing capital and growing the current account deficit than AS. AS is often incriminate by world investors for not borrowing enough to boost development and economic growth.Extrapolating the data on to 2020 1 have taken the MIFF projections to 2018 and extrapolated to 2020 using a moving average calculation. AS would be expected to grow the current account deficit as they spend more on infrastructure in an attempt to stimulate the economy. AS imports a large variety of goods and services and exports predominantly natural resources. It would be extraneous for AS to develop industry that can add value to the natural resources in order to add value and ultimately increase its export value whilst simultaneously decreasing the need to import. . 7 Money supplying and Credit Growth Money growth is shown on the primary vertical axis and credit g rowth as a percentage of GAP is shown on the secondary vertical axis for all three countries. The creation of coin is largely dependent on bank deposits which when this currency is leant out by the bank triggers the money creating process. The balance of payments and government finances are both major contributing factors to the creation of money. piggish savings, credit growth are also triggers for money growth as they contribute to the enumerate of bank deposits.Fig. A. 7. 1 in Appendix indicates MM annual money growth and credit growth as a percentage of GAP growth. Although there is considerable offset between the 3 countries the money growth trends year on year between all three countries are very similar. In the years preceding 2008 AS and IN showed consistent annual MM money growth of above 10%. In the global recession of 2008/2009 AS was hardest hit and dropped down to a money growth of just over 2% but has recovered to Just over 5% and is expected to be sluggish in mone y growth extrapolating to 2020.IN managed to remain less effected by the global recession and has retained annual money MM growth in excess of 10%. IN is expected to show more conservative money growth figures to 2020 as the world economy remains sluggish. GE has shown a reduced money MM growth and is even wowing negative money growth since 2009. The trend extrapolated to 2020 is expected to remain much the same. In AS credit growth as a percentage of GAP is extremely high at an average of over 185% of GAP since 2004. In comparison to GE (129%) and IN (67%) for the same period.The growth in credit does not result in bank deposits and subsequently an increase in credit growth has a negative impact on money growth. 2. 8 Budget Deficit and governing body Debt Fig. A. 8 in Appendix A indicates the cipher deficit and government debt as a percentage of GAP for AS, IN and GE for the period 1995 to 2020. The cipher deficit for all three countries is shown on the primary vertical axis and the government debt for all 3 countries is shown on the secondary vertical axis. As a general rule of thumb the budget deficit should not exceed 3%.Since the late sasss AS has managed to consistently achieve budget deficits lower than 3% and in 2006 even managed to achieve a budget surplus. Since 2007 the budget deficit for AS and IN has increased with the AS budget consistently above the illusory 3% value. Since the 2008 and 2009 recession the AS government has, in similar spurt to the USA governments tumulus plan, understandably been spending more in an attempt to fuel the economy and stimulate much needed economic growth. Similar to AS IN has increased government debt and is slowly bringing their budget deficit down from deficit in excess of 10% to below 9% and trending downwards.GE has decreased its government debt as a percentage of GAP and has firm control of its budget deficit showing consistent budget surpluses since 2012. Extrapolating the budget deficits to 2020 we can e xpect GE to remain in a surplus situation with AS stabilizing and remaining at Just above 4% with a possibility of returning to below 3% budget deficit. IN is expected to perform well and reduce their budget deficit to below 7% consistently to 2020. In terms of Government debt, GE is expected to consistently reduce government debt in line with the conservative economic plan and in line with EX. guidelines.AS is expected to increase government debt up to 2020 as it needs to stimulate economic growth through government spending. IN will continue to reduce government debt to 2020 as indicated in Fig. A. 8 in Appendix A. 2. 9 pull in Fixed Capital Formation the AS public to start to save. The Gross savings for all three countries has been extrapolated based on a moving average. . 10 Human Development Index Fig. A. II in Appendix A indicates human development index (HID) for AS, IN and GE for the period 1995 to 2020.The HID is a measurement of life expectancy, educational attainment and income. The value expressed by HID is a value between O and 1 . The human development index is a measure of equality within a country and a value of 1 would mean perfect equality and O would mean perfect inequality. As expected GE the developed country has the highest HID rating with an average of over 0. 9 since 2005. AS comes in second place with an average of 6. 19% from 2005 to 2014. AS has nee of the worlds most progressive constitutions and is based on the belief that AS belongs to all who live in it.AS is not without its equality challenges and unemployment, declining education system (WEFT global competitiveness report rates AS education as 46th out of 148 countries), high crime rates (rape in AS is the highest in the world), and widening gap between rich and poor. IN score worst on the HID as a result of a large population many of whom live in abject poverty. It is however nice to see that things in IN are changing and they have come a long way since 1995 when they scored only 0. HID and in 2014 they scored 0. 56 Just less than AS.Extrapolating GE HID to 2020 we SE no reason for any change and expect to see consistent value Just above 0. 9 for the whole period 2014 to 2020. Extrapolating AS HID to 2020 we expect the effects of a less competitive education system coupled with increasing unemployment, growing crime rate and widening of the gap between rich and poor to stagnate any improvements and predict a possible decrease in the HID for AS over the period 2014 to 2020. Inequality in IN is still a problem and we predict moderate improvement in HID but until there is a fundamental change especially in