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Source - Article by Cees Bruggemans
Profile: Cees Bruggemans is Chief Economist of First National Bank.
During the Asian Contagion crisis of 1998, the SARB got ambushed and with it our financial system. We literally would take years recovering from the experience. South African consumers took five years, from mid-1999 to mid-2004, to recover from the shocks, going by subdued consumer confidence and modest real spending data. It was the shock of 1998’s prime interest rate of 25.5%, followed shortly in 2001 by a halving of the Rand (by now the feared harbinger of a prime 25% shock), and then the aftershock of another 4% interest rate tightening during 2002, that left South African consumers bomb shocked and feeling out of their skulls.
Throughout these five years the FNB/BER consumer confidence index lingered below breakeven (the 50/50 nil line), meaning a small majority of consumers expressed lack of confidence. For long there lingered a general moroseness and fear of new shocks. Understandably so. Anybody having experienced prime 25% or halving of the Rand and the fears this engenders won’t easily forget it. GDP growth during this five year period averaged only just over 3%. Consumers also advanced but not at an exceptional pace. It remained for long a time to be cautious and timid. Business investment also dragged.
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