than expected, bond yields can easily reverse part of their recent decline, especially if the recent us inflation softness proves transitory, as most economists indeed anticipate. conversely, if global growth data surprise on the downside, emerging markets could suffer from a ‘ flight to safety ’ and renewed appreciation of the us dollar. last year ’ s events, just like the ‘ taper tantrum ’ of 2013 or the ‘ investment recession ’ of 2016, show that if global financial conditions become less favourable, all the emerging countries will be affected to some extent, although those with stronger fundamentals will show greater resilience. building resilience thus appears to be a necessary task for governments and central banks alike. in particular, it is important to ensure that page 8 of 10 inflation expectations remain well anchored and that, as a consequence, the lower exchange rate pass - through to inflation observed in the recent cycle remains the norm. but authorities should also keep the growth in fx - denominated liabilities under control, so as to allow exchange rate depreciation to play its role as an ‘ adjustment variable ’ and minimise any impacts from external currency and asset price shifts onto private sector balance sheets. they also have the option of using the available macroprudential tools should conflicts emerge between the respective goals of price and financial stability, including risks to these balance sheets. resilience also depends on limiting dependence on foreign capital to meet domestic funding needs. it is therefore important for governments to ensure, through a mix of prudent fiscal policies and an environment that is conducive for private savings, the absence of any major mismatches between the domestic supply and demand of debt securities. hence, when non - residents eventually reduce their bond holdings, these net sales will be more easily absorbed by domestic investors, and the domestic market for securities will remain liquid. appropriate, sophisticated market tools to hedge against currency and interest rate risk can only help in the deepening of domestic markets. these tools i have just mentioned deal more specifically with currency - and capital flow - related risks. nonetheless, the list is not exhaustive. resilience also depends on the way in which investors perceive the institutional and governance quality of the recipient country, the existence of checks and balances, and the depth and quality of its political debate. and, as south africa ’ s experience shows, financial resilience also depends on real economic resilience. south africa ’ s inflation expectations may be better anchored than

keynote address by daniel mminele, deputy governor of the south african reserve bank, at the 2019 bnp paribas global official institutions conference paris 19 june 2019 the global backdrop and monetary policy in emerging markets introduction ladies and gentlemen, good afternoon. thank you to bnp paribas for allowing me the honour to deliver the opening keynote address at this prestigious gathering of global official institutions. also allow me to commend the organisers of this event for their foresight in coming up with diverse and well - balanced topics that have risen to the top of the global agenda. there is no doubt in my mind that, at the present moment, uncertainty in the global macroeconomic environment, including rising geopolitical uncertainties, elevated trade tensions and rising debt levels, dominate the discussions of most global investors and policymakers. in my remarks today, i will discuss the implications of these developments for emerging market economies and the possibility of further risk from market volatility, before i conclude by touching on the policy options at our disposal to navigate through these rather turbulent times. page 1 of 10 an uncertain global economic environment investors and policymakers alike have had a nervous last few months. it is often said that expansions do not die of old age. yet, as they lengthen in duration, reaching nearrecord periods in some cases, observers increasingly worry about whether the trigger of the eventual downturn is already there. are we in such a case at present? in his foreword to global economic prospects published earlier this month, world bank president david malpass writes that ‘ global growth has continued to weaken and momentum remains fragile ’ 1. compared to its january forecast, the world bank has this month downgraded its forecast for global growth in 2019 by 0. 3 percentage points to 2. 6 %. furthermore, it sees only a mild recovery ahead, to 2. 8 % by 2021. revisions to this year ’ s forecasts are broad - based, across both advanced and emerging economies. private sector consensus forecasts have similarly been scaled down in recent months. in some countries, a moderation was expected after the strong momentum observed in late 2017 and early 2018. in the united states ( us ), for instance, economists anticipated that the boost to private spending from the fiscal stimulus of the first half of 2018 would eventually fade. this has indeed happened, although the us economy remained dynamic at the start of 2019, rising by a surprisingly strong 3. 1 % when annualised, despite a