r20, 4 billion in bond inflows and r15, 3 billion in equity inflows. part of the reason for the volatility in capital flows has been linked to monetary policy developments in advanced economies which in the main impacts on risk perception. in times of heightened risk aversion, money generally flows to reserve currencies such as the dollar or euro, causing emerging - market currencies to depreciate. the rand of course has been no exception. over the past 12 months, the rand has lost roughly 21 per cent against the greenback, 20 per cent against the euro, and a staggering 44 per cent against the japanese yen. however, we cannot restrict ourselves to comparisons with movements against advanced - economy currencies. take, for example, the jp morgan emerging market currency index ( or emci ), which comprises most major emerging - market currencies, including those of all the brics member countries. between january and october last year, the rand moved very much in line with this basket of currencies. during that period, the emci, when removing the impact of the rand – which has a weight of 8, 3 per cent in the basket – lost approximately 13 per cent against the us dollar, a loss that was almost exactly mirrored by the rand. however, since october, the emci has lost only 0, 5 per cent against the us dollar, whereas the rand has shed a further 5 per cent. while all such calculations have their limitations, the fact of the matter is that the rand has been one of the worst - performing emerging - market currencies over the past nine months, despite emerging markets in general facing the same external conditions. this illustrates that factors unique to south africa have had a bearing on the performance of the local currency. one such factor, which has recently drawn much attention in media and policy circles, has been south africa ’ s credit ratings. south africa ’ s sovereign credit rating south africa ’ s sovereign credit rating has been a source of market uncertainty for some time. national treasury, government in general, and the south african reserve bank ( or sarb ) have indicated that economic policy will be targeted at addressing the relevant concerns in an effort to prevent a ratings downgrade and put south africa ’ s rating on an upward trajectory. without delving into too much detail, in simple terms a country whose debt is considered non - investment grade has to pay higher interest rates on newly issued debt.

the macroeconomic fundamentals are required, suggesting that, in the absence of demonstrable progress being made as part of a concerted effort involving all social partners, the risk of downgrades during the next reviews towards the end of this year should not be underestimated. recent economic growth developments as i move towards the end of my remarks, let me make a few comments on domestic growth developments and touch on monetary policy issues before i conclude. after achieving pedestrian growth of only 1, 3 per cent during 2015, the economy contracted by an annualised 1, 2 per cent in the first quarter of 2016. this contraction more than erased the gains of the previous two quarters. in fact, the size of the economy is now smaller than it was in the final quarter of 2014. much of this decline has originated in the primary sector, which has contracted by almost 10 per cent over the past year, with mining in particular pulling the sector down. given the linkage effects, it is not surprising that developments in the primary sector have had spillover effects into other sectors of the economy, most notably into the manufacturing sector, which has contracted by 1 per cent over the past year. unfortunately, the growth outlook for the rest of the year will remain challenging, as shortterm indicators suggest a difficult picture for the second quarter and most forecasters predict that the economy will grow by well below 1 per cent this year. fortunately, two of the factors that had severely constrained the primary sector lately – the drought and electricity supply issues – are expected to fade over the coming year. this may imply that growth will reach a lower turning point during this year. the most recent forecast by the sarb suggests a modest recovery over the next two years, but the assumptions underlying this forecast had not factored in any possible spillover effects stemming from brexit. 5 employment numbers also make for rather disappointing reading. more than 1 in 4 economically active south africans are still without employment. even though the economy has added approximately 200 000 jobs over the past year, the labour force has increased by almost twice that figure. 6 employment creation remains the single most important policy challenge for south africa. in this regard, policymakers have recognised the need to increase potential output growth, which the sarb estimates at 1, 5 per cent during 2016 – insufficient in light of south africa ’ s developmental needs. this requires the effective and efficient implementation of growth - enhancing structural reforms. budget review, february 2016 ( www. treasury. gov