5% in 2009. From 2010 onward growth steadily recovered, reaching 3% in 2011. Over the 2001 to 2007 period, it seems that growth and government expenditure were positively related. The second difference of GDP roughly matched the rate of growth of government spending as a proportion of GDP. From 2007 onwards this trend was drastically reversed. In 2008, one period after GDP began to decline, government spending rose sharply as a proportion of GDP as countercyclical policy was enacted. This growth trend continued in 2009 and 2010 and then levelled off at 21.5% of GDP. One period after government expenditure began to increase rapidly, GDP followed the same trend. The reader will notice the almost parallel slopes and flattening-off of the curves, with GDP lagging by 1 period. Changes in government spending as a proportion of GDP are multiplied to cause an overall change in GDP in the next period. From the strong relationship between government expenditure and GDP growth, the conclusion can be drawn that countercyclical government spending was effective in pulling South Africa out of recession and towards stable, albeit slow, economic growth. Several other facts combine to make this conclusion more convincing. Gross capital formation declined from 2009 to 2010, while trade imbalances worsened (SARB 2010:107). These two factors would alone cause a decrease in GDP. This gives good reason to believe that the bulk of recovering growth was due to increased government spending, thus strengthening the conclusion that countercyclical fiscal policy was successful. .
Positive GDP a good indicator, but it is essentially meaningless in the context of a recession unless it creates employment, or at the very least reverses job losses. Economic policymakers must always be mindful of the real effects of their actions. Hence, a stricter and more humane measure of the success of countercyclical fiscal policy must unemployment figures.
