larger sterilised operations. thus, the authorities in their countries are facing challenges that are arising from large cross border flows and financial market volatility that is related to possible inappropriate risk pricing by international investors. in sum, while i see good prospects for the global economy, there are a number of risks emanating from the behaviour of oil prices, adverse developments in the us housing market, persistence of global imbalances, large leveraged positions in financial markets, and possible emergence of inflationary pressures. in addition, there is also the threat of protectionist pressures with adverse consequences on global growth. the evolving situation needs to be carefully watched and policy makers should be ready to respond to emerging challenges promptly and effectively. reshaping of surveillance surveillance is the key responsibility of the fund. we have noted the ongoing work in this important area. we would be supportive of efforts that would enhance the relevance of surveillance and increase its effectiveness. the basic approach and principles for moving ahead have been laid down by the managing director clearly and succinctly : ( i ) the revised decision should muster the broadest possible support ; ( ii ) it should not in any manner, overt or covert, introduce new obligations ; and ( iii ) it should not move towards a more compliance - based approach. i am confident that, if we approach the issue with these principles in mind, it would assuage many apprehensions of members. in the context of the review of the 1977 decision, my understanding is that the decision derives its legal basis from article iv section 3 ( b ) on surveillance over members ’ exchange arrangements. the adoption of new principles that are being currently debated must be limited to the subject matter of surveillance over exchange rates. we would be uneasy to see the insertion of any new principles that qualify domestic policies with peripheral consequences on exchange rate management. while it is open to the fund to suggest “ factors ” or “ points for consideration ” relating to what constitutes sound monetary, fiscal or financial sector policies, it must be clearly understood that such guidelines qualify the fund ’ s oversight over members ’ domestic policies under article iv section 3 ( a ). they cannot and should not be regarded as principles qualifying firm surveillance over exchange rates under article iv section 3 ( b ). as regards exchange rate surveillance, the proposed draft new principles seem to go beyond the intent of article iv in so far as formally taking on board the concept of " fundamental exchange rate misalignment ". in view of conceptual and method

’ s commitment and actions to start rooting out corruption in various spheres of society, particularly in government and state - owned enterprises. business confidence indicators improved, with the ‘ expected business conditions ’ category in the absa purchasing managers ’ index surging in february to its highest level since 2001. similarly, the fnb / ber2 consumer confidence index reached an all - time high in the first quarter of this year. moody ’ s affirmed the country ’ s investment grade rating and changed the negative outlook to stable, preventing south africa from falling out of the citibank world government bond index, an event that could have precipitated large - scale selling of south african government bonds by non - residents. 1 moody ’ s investors service 2 first national bank / bureau for economic research page 2 of 10 the rand is currently trading at around r12. 50 against the us dollar, after having appreciated to a low of around r11. 60 in late february. there has been a resurgence of capital inflows against the emerging market trend, while credit default swap spreads have narrowed by over 50 basis points. economic growth outcomes surprised on the upside in the fourth quarter of 2017, and the growth outlook has improved. the key question is : is south africa finally on the road to a sustained recovery? furthermore, are these developments ‘ real ’ rather than just a reflection of ephemeral euphoria? it has been a very positive start, and no doubt an important turning point for the country. but it is too early to declare that we are on a new growth trajectory. most of the economic growth forecasts have been revised upwards, with the latest reuters consensus forecasts expecting growth of 1. 6 % and 1. 9 % for 2018 and 2019 respectively, up by almost 0. 5 percentage points since november last year, and a forecast of 2. 3 % for 2020. the sarb ’ s growth forecast for 2018 has been revised upwards from 1. 2 % in november to 1. 7 % in march. our model predicts a slight moderation to 1. 5 % in 2019 due to tax effects, but reaching 2. 0 % in 2020. the monetary policy committee ’ s ( mpc ) assessment is that the risks to these forecasts are on the upside. the improved outlook is based, together with upward revisions to past economic data, on the strong improvement in confidence. recent research conducted at the sarb3 suggests that the collapse in levels of confidence in the past few