It's that time of the year again. The time to take a little break, kick back, relax and get a breather from a long, hard, recessionary year. 2009 was a difficult one, beset by the global credit crunch South Africa managed to weather the storm better than many other countries. At the beginning of the crisis there was talk of things like decoupled economies. Economies like ours that were not completely webbed into the global economic crash. We were not completely decoupled, rather partially but we managed to survive. So what were the factors that enabled us to get this far relatively unscathed?
- The National Credit Act
- Inflation targeting
- Partial decoupling
The global economic crash was brought on in a large part by risky lending practises. The National Credit Act was set up to prevent these kinds of risky lending practises and is now seen globally as a case study in how lending markets should be regulated. The NCA was designed to stop lending to people who were already over-extended. The policy of inflation targeting has come in for flack from many quarters but the slow and steady approach has contributed to our relative stability and inflation is now just within the target band of 3 to 6 percent. Growth based on interest rates with its attendant problems of hot money was avoided.
We are not decoupled from the global economy, but we are somewhat isolated via mechanisms such as exchange controls. Our banks were not allowed to just go and invest our money in dodgy derivatives and that has protected us considerably from the credit crunch. We did go into recession but that recession is now technically over and we have the World Cup to look forward to in 2010. As always staying on top of your budget plan is key to keeping your finances in order and economically South Africa is doing a lot better than we could have been and much better than many of the world's largest economies. Here's to the end of 2009 and the beginning of 2010.