S.A not heading for recession,

That's rights folks, unlike my gamma ray exposed hairline , S.A is no currently heading for a recession.

Unlike those of you who live in those godforsaken countries dripping in euotrash/rednecks...or even worse....australians, we South Africans who still live here are awesome people. There's no point I'm trying to make with the above statement, it serves only as a method for me to once again point out what softcock w@nkers you are. And being awesome people, you'll find unlike you wimps ,little things like "recession" are simply swatted away by the mere undeniable superior Aura of just being a local South Africa.

That's the way I see it anyway, but here's how an economist sees it (for those of you who ejoy your news with a little more data and a little less "go f#ck yourselves). Anyway....read away. I'm going to watch us whip aussie again in cricket with our b team wile you go wipe the vomit off the streets and clean out the beer glass with your dish cloth for minumum wage , fighting the urge not to strangle yourself with it to just end the miserable universal fart that is your expat life.

Johannesburg - South Africa could just skim the recession affecting developed economies thanks to some "shock absorbers" that could cushion the fall, says an economist.

Speaking at a briefing on Thursday, Rand Merchant Bank's chief economist Rudolf Gouws said the buffers protecting the slowing South African economy are the rand's flexibility, falling interest rates, rising real household income, a social safety net, infrastructure and the 2010 Fifa World Cup football tournament which will be hosted in SA.

However, economic growth - as measured by SA's gross domestic product (GDP) - will be barely positive towards later this year, according to Gouws, who said that he expected it to only recover "somewhere in 2010".

He said that SA has not escaped the global slowdown that has plagued economies like the US and UK with a recession, despite some experts saying that there could be decoupling between first-world economies and developing ones. "Decoupling is a myth," said Gouws.
Gouws said that the years prior to 2008 consisted of a commodity and housing boom, and economies got 'greedy'.

The unprecedented rise in housing prices resulted in consumers going on a credit binge - aided by lax lending rules - as the rising equity in their homes supported their credit-based purchases of items like cars and plasma televisions.

"In SA, households borrowed too much and saved too little, and were granted credit easily [before tighter lending criteria introduced through the National Credit Act came into place]. We spent more than we had available on our balance sheets and were actually not saving.
"At some point, things had to catch up. The interest burn is overwhelming," said Gouws.
"It's going to be tough and rough but I do believe it's a necessary adjustment to the excesses we had before".

Gouws noted that the slowdown in consumer price inflation was an indication that the real economy was growing more slowly than the potential economy. The key measure of inflation targeted by the SA Reserve Bank, CPI, would be within government's desired range of 3% to 6% "pretty soon", Gouws said.

The bank's monetary policy committee (MPC) started cutting rates in December 2008, and economists are suggesting that the committee could cut rates by between 50 basis points and 100 basis points when it meets in early February.

Be careful what you wish for ..

Gouws said that a lot of South Africans are hoping for a big cut, "but you have to be careful what you wish for", he said.

Even though a decline in retail sales and manufacturing production are indicating a 100 basis-point cut, the country's current-account deficit remains a major policy consideration.

"The only times in which we've cut interest rates in the past is when our current account is running either a surplus or a very small deficit," he said, adding that if the MPC had to aggressively cut rates, it would raise imports versus exports, cut domestic savings in relation to investment and increase domestic spending.

If SA had strong exports, the country would be wealthier as it would earn more from foreign importers. As importers would be charged in rands, the currency would be in demand which would strengthen its value, which gives SA citizens benefits to import other country's goods as they would be less expensive, in foreign exchange terms.

By cutting rates, there is a danger that the rand could lose its value which impacts exports negatively, as SA citizens wouldn't earn as much when they sell goods overseas because of foreign exchange losses, and SA importers would lose out on stronger currency benefits as it would be more expensive to import goods with a weaker currency.

Aggressively cutting rates could increase domestic spending which could lift inflation. This, in turn, could affect SA's purchasing power parity (PPP) against developed economies like the US, said Gouws.

PPP is a theory of exchange rate determination and a way to compare the average costs of goods and services between countries. Should a consumer buy something in one country, it is very likely that the same good won't cost the same somewhere else as a result of economic fundamentals like demand and supply.

PPP solves this problem by taking some international measure and determining the cost for that measure in each of the two currencies, then comparing that amount.

Gouws said SA's purchasing price parity is merging with that of the US.

"So the rand is falling at a slow rate because PPPs are merging. It's important to keep inflation down because we don't want our PPP to drop too much against that of the US. I don't think the rand will drop much when interest rates come down, but then again, I don't think the MPC will not drop rates off a cliff," said Gouws.

Despite a gradual economic recovery in 2010, Gouws believes there will still be imbalances that need addressing. "The market shouldn't expect things to pick up too quickly."