HILARY JOFFE: Pretoria's hunger for borrowing is crowding out investment

The government dissaved in the second quarter far more than corporations and households saved

04 October 2020 - 00:09

Is the government consuming all the investible resources in the economy, and if it is, what are the prospects for an economic recovery? Latest Reserve Bank and Treasury data provide some scary indicators of the "crowding out" effect economists talk about when a government's borrowing balloons to levels that squeeze out the productive spending that would support economic growth.

An economy can't in theory invest more than it saves, unless it can draw on inflows of foreign savings. But the government's June emergency budget already showed it needing to borrow this year more than the total savings SA generated last year. And the latest Reserve Bank quarterly bulletin shows annualised savings plummeting to R458bn in the locked-down second quarter of this year, which is far below the R777bn the government estimated it would have to borrow in the current year...

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