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The Impact of the International Economic Crisis in South Africa

Author

Listed:
  • Margaret Chitiga
  • Ramos Mabugu
  • Hélène Maisonnave
  • Véronique Robichaud
  • Bernard Decaluwé
Abstract
A dynamic computable general equilibrium model based on the PEP standard model developed by Decaluwé et al. (2009) is used to evaluate the impacts of the international crisis on the South African economy. However, we have changed some assumptions in order to better represent South African specificities. A major innovation in this regard is the modelling of unemployment and the influence of labour unions on the labour market. Two scenarios encompassing a severe and moderate recession are run. The effects of the crisis on the economy are really quite harsh, even in the moderate recession scenario, both in the short run and the long run. Indeed, the decrease of world prices combined with the drop of world demand lead to a decrease in production for many sectors with consequent laying off of workers. The impact on institutions is also worrying: agents see their income as well as their savings decreasing. The huge drop in firms’ savings has a dire impact on total investment while the huge negative impact on government accounts of protracted slow global growth imply tight public budgets for some time to come. Thus, some gains made by the government prior to the crisis may have been reversed by the economic crisis. It is apparent from the results that the impact of the crisis will drag into the long run with the situation still below what it would have been in the absence of a crisis until 2015.

Suggested Citation

  • Margaret Chitiga & Ramos Mabugu & Hélène Maisonnave & Véronique Robichaud & Bernard Decaluwé, 2009. "The Impact of the International Economic Crisis in South Africa," Cahiers de recherche 0952, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0952
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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2009/CIRPEE09-52.pdf
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    References listed on IDEAS

    as
    1. Jung, Hong-Sang & Thorbecke, Erik, 2003. "The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 701-725, November.
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    Cited by:

    1. Mabugu, Ramos & Robichaud, Veronique & Maisonnave, Helene & Chitiga, Margaret, 2013. "Impact of fiscal policy in an intertemporal CGE model for South Africa," Economic Modelling, Elsevier, vol. 31(C), pages 775-782.
    2. Helene Maisonnave & Ramos Mabugu & Margaret Chitiga, 2015. "Economywide consequences of attaining Millenium Development Goals in South Africa'," Economics Bulletin, AccessEcon, vol. 35(2), pages 1118-1127.
    3. Vusi Gumede, 2021. "Revisiting Poverty, Human Development and Inequality in Democratic South Africa," Indian Journal of Human Development, , vol. 15(2), pages 183-199, August.

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    More about this item

    Keywords

    Dynamic Computable General Equilibrium; Economic Crisis; South Africa;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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