overall net positive, there are also negatives to the decline in the oil price. a number of our export partners in africa, such as angola and nigeria ( which are oil - exporting countries ), have been severely affected by the decline in oil prices. reduced export revenues and growth in these economies will adversely affect their trade with south africa. added to this has been the generally weak global growth outlook, particularly in some of south africa ’ s major trading partners, including the eurozone and china, which also offsets the positive impact arising from the decline in oil prices. furthermore, a lower oil price may strengthen disinflationary pressures in places like the eurozone and japan, further weakening their growth prospects 1 with adverse implications for countries like south africa which are reliant on these export markets, although we are encouraged by the most recent assessment of the outlook for the eurozone and japan as contained in the april 2015 weo. on balance, for an oil - importing country like south africa, the positives of an oil price decline outweigh the negatives. however, we cannot afford to be complacent. in south africa, the risk to the inflation outlook is tilted to the upside for a variety of reasons. firstly, oil price developments are uncertain. secondly, while expectations of us monetary policy normalisation appear to have been moved out, any surprises to the contrary could increase the already high volatility in financial markets, and particularly in foreign - exchange markets. finally, the current decline in inflation rates as a result of the recent oil price movements, in effect, means that inflation outcomes in a year ’ s time will be subject to strong adverse base effects. the policy challenge is to ascertain the future path of oil price developments – this is a formidable task! it is uncertain whether the lower price levels that we are currently experiencing are transitory or permanent. put differently, could oil prices increase again as quickly as they went down? while there seems to be consensus that we would not return to the most recent peaks, unfortunately, these questions do not lend themselves to easy and clear answers. according to imf ’ s world economic outlook update, january 2015, despite substantial uncertainty about the evolution of supply and demand factors, futures markets suggest that oil prices will rebound but remain below the level of recent years. experience to date does, however, show that futures prices have been poor predictors of spot prices on the oil market. it is clear that

in march 2008 to around us $ 712 in november, but is currently trading above us920 per ounce. however other commodities have not fared as well. from a high of us $ 2250 per ounce in march 2008, platinum prices declined to us $ 771 per ounce, before recovering to current levels of around us $ 1130 per ounce. aluminium prices reached levels in excess of us $ 3300 per ton in july 2008, but by february 2009 the price had declined to below us $ 1300 per ton and currently around levels of us $ 1540 per ton. similar trends are evident in the behaviour of other commodity prices. of course, oil price developments have benefited us. having reached levels of almost us $ 150 per barrel in july last year, international oil prices declined to below us $ 35 per barrel, and are now at levels around us $ 57 per barrel. commodity prices in general are likely to remain subdued in line with global growth 2. 6 the turmoil on the international financial markets has also impacted on the destination and size of capital flows. not surprisingly, capital flows to the developing and emerging market economies have declined, with the international institute of finance expecting flows to emerging markets to decline from over us $ 900 billion in 2007 to around us $ 165 billion in 2009. this has implications for exchange rates and the financing of current account deficits in these countries, at a time when export markets are under pressure. capital is in fact flowing back to the us, the source of the current crisis. we are told that this is a “ flight to quality ” or “ risk aversion ”. an irony indeed. 3. the implications for the south african economy 3. 1 given south africa ’ s close trade and financial links with the global economy, it is not surprising that the south african economy would be affected by these adverse developments. after 4 years of gdp growth around or in excess of 5 per cent, the growth rate declined to 3, 1 per cent in 2008, with a contraction of 1, 8 per cent in the fourth quarter. current indications are that the negative trend continued in the first quarter of this year. the high frequency data indicate that the manufacturing sector in particular remains under pressure : recent data from statistics south africa show that manufacturing output in the first quarter of 2009 declined by 6, 8 per cent relative to the previous quarter, while mining production declined by 12, 8 per cent over the same period. the utilisation of manufacturing productive capacity declined to its lowest level