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Blog: 22 April 2016 (GDP Expenditure)
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So the basic economic equation for calculating the size of the economy is Y=C+I+G+(X-M)
Where Y= Total Economy C=Consumer Expenditure I=Investments (Capital Formation) G=Government Spending X=Exports M=Imports This method of calculating GDP is known as the Expenditure method. Question is how much does each contribute to South Africa's economy? Note data below is based on South African Reserve Bank data, and not GDP data from Statistics South Africa |
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Well the bar chart to the right shows the contribution of each of the different components to South Africa's GDP.
From this chart its clear by far the biggest driver of the South African economy is the Consumer spending component. The second biggest contributor to our economy is our Exports, but that is more than offset by the fact that we import so much. Effectively our Imports nullify any gains received from our Exports. In fact since 2010 our Imports has exceeded our Exports by over R150 billion. See the graphic below for our trade balances since 2010. This was published on our Trade data page. |
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Summary:
In summary.. In order for this economy to thrive we need a few things. One is to look after the consumers in South Africa as they are the main drivers of the economy, so the Reserve Bank should be mindful of this when setting monetary policy (i.e. Interest Rates).
And secondly, we need to boost our exports and curb imports (where we can, certain essential items such as crude we have no choice but to import), but for items we can manufacture locally but we importing nonetheless, that is where we need to focus on changing the trend of importing and rather manufacture it locally. The more we manufacture locally the less dependent we will be on imports, the better off our overall economy will be Remember. Local is Lekker!! |