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Working Paper

Policy Change and Economic Growth : A Case Study of South Africa

ACCOUNTING AGRICULTURE ASSET VALUES BALANCE SHEET BANK LENDING BARRIERS TO ENTRY BINDING CONSTRAINT BOND INDEX BORROWING COST BUDGET DEFICIT BUDGET DEFICITS BUSINESS CYCLE CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL STOCK COMMODITY PRICES COMPARATIVE ADVANTAGE COMPETITIVENESS CONSUMER PRICE INDEX CONSUMERS CORPORATE SAVING COUNTRY RISK CREDIBILITY CURRENCY CURRENT ACCOUNT DEFICIT DEBT DEBT LEVELS DEBT SERVICE DEPENDENCY RATIOS DEVELOPING COUNTRIES DISEQUILIBRIUM DISINFLATION DISTRIBUTIONAL EFFECTS DOMESTIC MARKET DOWNWARD PRESSURE ECONOMIC CONDITIONS ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC POLICIES ECONOMIC RESEARCH ECONOMIC SECTORS ECONOMIC SYSTEMS ECONOMIES OF SCALE ELASTICITY EMERGING MARKET EMERGING MARKET BOND EMERGING MARKET ECONOMIES EMERGING MARKETS ENABLING ENVIRONMENT EXCESS DEMAND EXCESS SUPPLY EXCHANGE CONTROLS EXCHANGE RATES EXPECTED RETURN EXPENDITURE EXPORT GROWTH EXPORT PERFORMANCE EXPORTERS EXPORTS FACTOR MARKETS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL LIBERALIZATION FINANCIAL SYSTEM FISCAL DEFICIT FISCAL DISCIPLINE FISCAL POLICIES FISCAL POLICY FIXED CAPITAL FIXED INVESTMENT FOREIGN CAPITAL FOREIGN CURRENCY FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVES GDP GDP PER CAPITA GLOBALIZATION GOLD GOVERNMENT INVESTMENT GOVERNMENT SAVING GOVERNMENT SPENDING GROSS FIXED CAPITAL FORMATION GROWTH PERFORMANCE GROWTH POTENTIAL GROWTH RATE GROWTH RATES HIGH INFLATION HOUSEHOLD INCOME HOUSEHOLD SAVING HOUSEHOLD WEALTH HUMAN RESOURCES IMPORT IMPORTS INCOME INCOME GROWTH INCOME LEVELS INEFFICIENCY INFLATION INFLATION TARGETING INFORMATION ASYMMETRIES INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INSTITUTIONAL DEVELOPMENT INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL CRISES INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL FINANCIAL STATISTICS INVESTMENT DECISIONS INVESTMENT LEVELS INVESTMENT PROJECTS INVESTMENT RATES INVESTMENT SPENDING LABOR MARKET LABOR MARKETS LAND REFORM LEVEL OF INFLATION LEVEL OF INTEREST RATES LOW INTEREST RATES LOW TARIFFS MACROECONOMIC MANAGEMENT MACROECONOMIC POLICY MACROECONOMIC STABILITY MACROECONOMIC VARIABLES MARGINAL PRODUCT MARKET CAPITALIZATION MARKET CONCENTRATION MARKET DEVELOPMENT MARKET ECONOMY MARKET STRUCTURE MARKET STRUCTURES MONETARY POLICY MONETARY POLICY FRAMEWORK MONOPOLIES MORTGAGE MORTGAGE INTEREST NATIONAL TREASURY NATURAL RESOURCES NOMINAL EXCHANGE RATE NOMINAL WAGE POLICY RESPONSE POLITICAL ECONOMY POLITICAL INSTABILITY POLITICAL STABILITY POLITICAL UNCERTAINTY POTENTIAL OUTPUT POVERTY REDUCTION PRICE INCREASES PRIVATE INVESTMENT PRODUCT MARKETS PRODUCTION INCREASES PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS PUBLIC FINANCES PUBLIC INVESTMENT PUBLIC SPENDING PURCHASING POWER RAPID GROWTH RATE OF RETURN RATES OF INFLATION RATES OF INTEREST REAL CONSUMPTION REAL COST REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXCHANGE RATES REAL GDP REAL GROSS DOMESTIC PRODUCT REAL INCOME REAL INTEREST REAL INTEREST RATES REPAYMENTS RESERVE RESERVE BANK RESERVES SAVINGS SHARE OF INVESTMENT STOCK EXCHANGE STRUCTURAL CHANGE STRUCTURAL PROBLEMS SURPLUS TARIFF BARRIERS TAX TAX COLLECTION TAX INCENTIVES TAX RATES TELECOMMUNICATIONS TIME HORIZON TOTAL FACTOR PRODUCTIVITY TRADE BARRIERS TRADE LIBERALIZATION TRADE POLICY TRADE SECTOR TRADE UNIONS TRADING TRADING PARTNERS UNEMPLOYMENT URUGUAY ROUND VALUE ADDED WAGES WEALTH WORLD ECONOMY WORLD TRADE ORGANIZATION WTO
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World Bank, Washington, DC
Africa | South Africa
2017-08-28T17:13:38Z | 2017-08-28T17:13:38Z | 2008

South Africa's growth experience provides an example of how contrasting growth trends long-term decline followed by improved growth pivot around political change, in this case a transition to democracy. In the decade prior to 1994, South Africa experienced the worst period of economic growth since the end of the Second World War, with growth variable and declining. The proximate causes of slowing growth were trade and financial sanctions in opposition to the Apartheid government, political instability and macroeconomic policy decisions that resulted in higher inflation, increased uncertainty, and declining investment. Democracy has proved critical for, among other factors, creating the possibility of a peaceful and more stable future and reversing investor sentiment at a basic level. Political and economic leadership have been essential for improving the country's growth performance because of the effect on policy formulation, institutional development, regulatory design, and economic vision. Prudent fiscal policy and sound macroeconomic management have been critical factors in creating an environment conducive to growth by stabilizing economic conditions, lowering the user cost of capital, and putting downward pressure on the real exchange rate. This case study provides some insight into a more general perspective on political and economic transition and some of the key macro- and microeconomic policy shifts that need to occur to realize a more rapid and sustained growth path.

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