Economics for Sa

The balance-of-payments (BOP) bank notes of a country record the payments and re free reins of the people of the country in their proceedings with people of other(a) countries. If all transactions argon included , the payments and receipts of each country must be peer. I. E. Net Exports (NIX) always equal Net Capital Outflow (NCO). Although this is rarely the case. The BOP statement divides transnational transactions into three invoices the sure account, the stir in reserve assets/ metropolis account and the financial account.The current account and financial account are impacted by export/import of odds and run. Every areawide transaction results in a character and a debit. Transaction that causes notes to leave a country is a debit. Q How mevery economists does it take to change a light bulb? A Eight. One to screw it in and seven to hold everything else constant. Source http//enter. Mac. AC. UK/ Joke. HTML When the US purchases federation Afri fag end diamonds, the AS Current Account will prepare a credit and the US current account a debit.However AS will perplex a surplus of Dollars and so will purchase US assets framework US Bonds. This transaction will be put down in the financial account in the balance of payments. If South Africa buys US Dollars or any other immaterial currency as an asset, then this is also recorded in the financial account. 2. 2. 1 Net Capital Flows If South Africa buys to a greater extent US assets I. E. Invests more(prenominal) in the fosovereignty market than what foreign markets frame in South Africa, then South Africa has a POSITIVE acquit capital outflow.According to our example in the Market for AS Diamonds in the US , if South Africa has a trade surplus or current account surplus with the US then it will direct POSITIVE give the sack capital outflow as it will use the surplus of US dollars to purchase US assets. 2. 2. 2 South Africans Current Account deficit Please refer to Diagram 4 in the Appendix. A current account deficit meaner that a country is importing more goods and services than it exports. This is an indication that an economy is investing more than it is saving and is relieveing from other economies to finance its spending.We are an emerging/developing economy so we borrow in order to produce more BUT our current account deficit is growing and this is concerning. This is an indication that our economy is unbalanced and the governments efforts to redress this imbalance can be seen as they try to grow our local manufacturing industry. The deficits have been among the main reasons for the recent rand weakness as investors worry about South Africans ability to finance them. We will now examine developments in the foreign exchange markets and how they have impacted South Africa. 3.Please refer to diagram 9 for the historical trend of the last 5 years of the Saras exchange treasure against the USED, YUAN, GAP and EURO. Economists can supply it on demand. Source http//e nter. Mac. AC. UK/Joke. HTML You can immediately notice that the Rand (CAR) is rapidly moving between big tops and roughs. This meaner that the Rand is not immutable I. E. It is volatile. This is because South Africa is considered an emerging market. Any sudden change politically or globally will result in investors investing in more stable economies like the US (USED) or United Kingdom (GAP).We have greater financial volatility because we swing between economic prosperity and economic decline. The USED, GAP and Euro (RUE) are currencies of the most stable economies in the world and are predictable and considered a safe bet by investors. Their currencies float freely. china however pegs TTS currency to the USED and deliberately keeps the YUAN weaker than the USED so that it can encourage exports of its goods and services. Please refer to Diagram 5&6. From middle 2010 we see a consolidation or recovery of most countries from the 2008 world-wide Recession.This is due to the 20 10 FIFE World Cup that created positive sentiment toward AS. This also created investor confidence which led to steady Direct Foreign Investment. This event was an ideal selling platform for the tourism sector in AS. We see a peak in tourism during the World Cup. (Diagram AAA) This growth culminated at the end of 2010 (Diagram b), this reign interest increased the demand for AS goods and services which in turn increased the demand for the CAR which caused an appreciation of the CAR against foreign currencies.