##ial capacities and facilitates the integration of people into the formal economy. while employment is the first and best safeguard against social exclusion, social safety - nets are needed to cushion the effects of unemployment. moreover, the elements of social infrastructures such as clean water, sanitation and basic health services are public goods whose provision has a positive impact on welfare and potential growth. it is important to design social policies so as to permit market mechanisms to function effectively. as to the agreed actions to implement the g - 20 accord for sustained growth, the finance ministers and central bank governors adopted the reform agenda that translates our g - 20 accord for sustained growth into concrete policy measures for our countries. progress in this regard will be reviewed at the meeting in beijing in october 2005, which this seminar will feed into. as to progress by south africa, i am particularly pleased to report that the reserve bank has been making an important contribution to macroeconomic stability, thereby creating a stable framework for growth. cpix inflation has remained in the 3 - to - 6 - per - cent target range since september 2003, i. e. for 22 successive months. gross domestic product growth measured 3, 7 per cent in 2004 and is expected to grow at similar levels this year, and the government ’ s objective is to implement policies to raise the growth rate to even higher levels. to promote growth and employment, the south african government has continued along the path of fiscal discipline and has been focusing on enhancing the efficiency of the public service and on infrastructure investment, increasing savings and skills development. the deliberations of the next two days will help shape the strategies in this regard. i wish to conclude by referring to the often quoted inspirational words from robert lucas in 1988 “ is there some action a government of india could take that would lead the indian economy to grow like indonesia ’ s or egypt ’ s? if so, what exactly? if not, what is it about the “ nature of india ” that makes it so? the consequences for human welfare involved in questions like these are simply staggering : once one starts to think about them it is hard to think about anything else. ” 1 clearly the indian government seems to have met lucas ’ s challenge and so there are surely lessons to be learned from each and every country ’ s experience. we look forward to the presentations by the various delegates as set out in the programme during the course of the next two days and to discussions on economic growth and issues of common interest and relevance to our various countries. meanwhile,

nevertheless for some time now been experiencing inflation within the target range and surveys indicate clearly that inflation expectations are more firmly anchored at lower levels. it is now more important than ever for us to stay the course as continued price stability is the most crucial pre - requisite for sustained economic growth and development in the years ahead. 5. exchange rate developments the exchange rate of the rand against a basket of currencies recovered by 16 percent in the year to the end of december 2003 and, on balance, appreciated by a further 12 percent in the six - and - a - half - month period to the middle of july 2004, despite the temporary setback to the international prices of commodity exports in the second quarter. while these movements of the exchange rate of the rand reduced the international competitiveness of south african producers, it also caused the prices of imported goods to record twelve - month declines over the past 14 months, notwithstanding a significant increase in the international price of crude oil over this period. goods price inflation was accordingly moderated, both at the production and consumer level, contributing to a reduction in twelve - month cpix inflation. despite the fact that the rand is at a five - year peak to the dollar, prospects for the economy have continued to improve. tourism has fared better than expected and manufacturing output has improved significantly. the trade sector in particular is thriving, consumer confidence is at record levels and the world growth outlook remains favourable, with the result that some analysts have announced upward revisions to their real growth forecasts for the south african economy for 2004 and 2005. this, together with indications of a possibly more favourable credit rating for the country, flies in the face of the projections of most doomsayers. the process of dealing with a strong currency has most certainly been painful but also beneficial as it has forced productivity improvements and increased competition in the economy. although business leaders continue warning of eroding profits and impending cuts in investment and jobs, the local economy has been adjusting well to a stronger, more stable currency. significant problems have certainly been experienced by many mining and manufacturing enterprises as a result of the strength of the rand. this has had serious repercussions for the profitability of these enterprises, as well as their investment planning and employment. the recovery in the exchange rate of the rand has, however, forced companies to restructure their firms to cushion the impact of the strengthening rand. the restructuring has contributed to increasing resilience of the south african economy. besides restructuring, the manufacturing