some observers had feared, in part because of the us shale industry [UNK] s ability to quickly ramp up production once oil prices exceed the break - even point. admittedly, oil prices posted significant gains in the latter part of the year, rising from a low of us $ 44 per barrel in mid - june to us $ 63 per barrel as of 23 november. yet this move seemed to be more a reflection of stronger demand ( as global economic growth exceeded expectations ) than of a supply constraint that could endanger the economic recovery. overall, considering that many of the risks feared in early 2017 did not materialise and the fact that the „ push and pull [UNK] factors have remained favourable, the year saw page 5 of 12 renewed and solid net non - resident capital inflows into emerging markets, including south africa. in an october report, the institute of international finance ( iif ) projected that such flows would rise to us $ 1. 1 trillion this year, or to about 4 % of emerging - market gdp – meaningfully higher than the lows of 1. 5 % in 2015 although still far off the pre - crisis peak of over 9 % in 2007. the bulk of the improvement would reflect debt portfolio and banking - related flows. indeed, the iif estimates that in the first 10 months of 2017, the former totalled us $ 162 billion versus only us $ 37 billion for the whole of 2016. what should we worry about for 2018? of course, the fact that major risks did not materialise in 2017 should not breed complacency about the coming year, even though most official and private forecasters broadly agree about a continuation of the broad - based, relatively inflation - free economic expansion in most regions of the world in 2018. history teaches us that it is often when most observers concur about the low probability of negative scenarios that these unfold. the trigger of the next downturn may well be an event that no forecaster sees as a risk right now. nevertheless, economic downturns – beyond their immediate trigger – always have deeper underlying causes. let me list a few of these underlying trends which could be sources of fragility for the world [UNK] s economy. first, considerable uncertainty remains about the long - term impacts of the large - scale monetary stimulus put in place by the major central banks since the global financial crisis as well as about the ( more short - term ) implications of its gradual unwinding. while the degree of global monetary stimulus has so

continues to widen. disappointing economic growth, together with the surprisingly low buoyancy of major tax revenues relative to their bases, has compounded the fragility of south africa [UNK] s fiscal situation. page 8 of 12 for several years already, projected fiscal consolidation and debt stabilization have had to be postponed because of gdp growth shortfalls relative to budget projections. however, the medium term budget policy statement of october 2017 not only saw a meaningful upward revision to deficit estimates for the current year, but also did not project a reduction in that deficit in the outer years. consequently, the debt - to - gdp ratio is now projected to keep rising throughout the period, approaching 60 % by 2020 / 21. this mixture of weak growth and rising debt – the two concerns repeatedly flagged by ratings agencies – suggests that south africa must increasingly be wary of possible further downgrades to its sovereign ratings. following the announcement by fitch ratings yesterday that it has affirmed south africa [UNK] s bb + rating ( which in their case applies to both local and foreign currency debt ), announcements will be made later today by both s & p and moody [UNK] s on the outcome of ratings reviews recently undertaken by them. while exhibiting uncertainty and generating volatility, the recent behaviour of financial markets clearly highlights this risk. admittedly, as i have indicated earlier, the global economic and financial backdrop has sheltered south african assets for most of the year. yet they underperformed relative to their emerging - market peers. for example, in the first nine months of 2017, the j p morgan emerging - market foreign - exchange index appreciated by 5. 6 % while the rand gained only 1. 3 % against the us dollar. such an underperformance was already a warning sign of the relative unattractiveness of south african assets, as generally, in periods of improved global risk appetite, both the rand and domestic bonds tend to outperform their peers. in recent weeks, and in particular since the upward revision to the deficit and debt projections in the medium term budget policy statement, the sell - off in both the local currency and domestic bonds is a much clearer indication of investors [UNK] nervousness about south africa [UNK] s rising economic and fiscal risks as we draw the curtain on 2017 and move towards 2018. recent monetary policy developments the sarb cannot ignore this recent shift in the balance of risks affecting south africa [UNK] s economy or the way it is perceived by financial markets. obviously, the page 9 of 12 central bank does not target the