Inflation in South Africa

 

A photograph of Church Square, central Worcester, Western Cape, South Africa. In the background you can see the church. This square is accross the street of the Worcester Municipality.

 

 

 

 

                In 2001, it was established that South Africa’s inflation rate was set at 5.8%. That, however, seems to be changing. By the end of the year, it is expected that the rate of inflation will rise significantly. The main cause of this seems to be based on the following notion. South Africa has experienced a plunge in the value of currency (rands) over the last months of fiscal year 2001. Because of this, food prices are threatened. Particularly, wholesale grain prices have escalated 60% and an even greater burden may be placed on exports, ranging around 67%. The CPI may undergo huge shifts due to an increase in oil prices, anticipated by April of 2003.

 

        Overall, it is expected that the inflation rate may soon be up to 8.0%. Economists say that they estimate a peak rate of 9.0% by next September. So, does this introduce a significant problem to the country? Well, seeing as how this poses a threat to the prices of domestic products, it can be viewed as being problematic. On the flip side, the GDP is expected to rise by about 2.3%, and economists respond by saying that the upsides prevail over the inflation increase. Furthermore, it is predicted that by next year, the GDP should escalate by 2.7%, providing positive growth from the point of last year’s 2.6% GDP increase. Essentially, the change is not tremendous, but it is beginning to go in the right direction.

 

        The immediate country of Botswana has an inflation rate, which is very comparable to that of South Africa. In fact, its current rate is smaller than that of South Africa, at 6.6%. The reason for this is that Botswana has lifted itself from a very poor low-scale country to a middle-income prosperous terrain. Its prosperity has not yet called for a great increase in inflation, but like South Africa, it may very well reach that point when the economy begins to expand more. Botswana’s immediate neighbor, Zimbabwe, has not been as fortunate with a devastating inflation rate of 100%. Because of such actions, as the war in Congo, Zimbabwe’s economy has invested hundreds of millions of dollars into fighting. In this, the economy is being obliterated, with huge deficits and even more social problems, such as AIDS, to be concerned about.