and thailand experienced quarter - on - quarter annualised contractions in excess of 20 per cent, while contractions were also experienced in eastern and central europe and latin america. 2. 2 the outlook for the global economy in 2009 remains gloomy, with the imf, the world bank and the oecd all forecasting negative growth for the year as a whole. the discussions at the recent imf meetings confirmed a negative outlook, although demand stimuli and natural stabilisers are expected to start having an impact later in the year, and there are tentative signs that this may be the case. 2. 3 the pace of the downturn has been confounding the forecasters, and there have been continuous and large downward revisions of growth forecasts during the past few months. according to the latest imf forecasts, the world economy, which grew by 3, 2 per cent in 2008, is now expected to contract by 1, 3 per cent in 2009. in january, the forecast for 2009 the fifth annual state of logistics survey for south africa, csir, 2008. was for the world economy to grow by 0, 5 per cent. the so - called advanced economies are expected to contract by 3, 8 per cent this year, while emerging market and developing country growth is forecast to be 1, 6 per cent. africa is expected to experience growth of 2 per cent. a modest recovery is forecast for 2010 : the advanced economies are expected to experience zero growth compared to emerging market and developing economies growth of 4, 0 per cent. 2. 4 the impact on world trade from these events has been pronounced, and the world trade organisation predicted that the volume of global merchandise trade would contract by 9 per cent this year, compared to an annual average growth rate in trade in excess of 6 per cent since 1990. in an environment of weak demand and lack of trade finance, international trade will continue to suffer. the motor industry has been particularly hard hit as demand continues to decline globally. japanese motor vehicle exports declined by almost 50 per cent year - onyear in february, while global exports of motor vehicles declined by 64 per cent in that month. not surprisingly, protectionist tendencies have emerged, with some countries providing subsidies and discriminatory procurement provisions in national stimulus packages. 2. 5 also of relevance to the south african economy has been the sharp decline in commodity prices. fortunately, gold prices have remained relatively firm. the gold price declined from a high of around us $ 1000 per ounce

flexible exchange rate provide little evidence of any clear effects from differences in the monetary policy strategies. the canadian dollar, for example, does not seem to have been more stable even though the bank of canada has focused more on the monetary conditions and made greater use of interventions. forces behind the flexibles exchange rate at the time of the departure from the krona ’ s fixed exchange rate in november 1992, the real tradeweighted exchange rate was overvalued. inflation in sweden had been higher than elsewhere for a considerable period and this had successively eroded competitiveness. when the flexible regime was introduced, the krona depreciated markedly ; in the first six months the nominal tcw index weakened about 20 per cent. in that inflation in sweden had already been brought more or less into line with the rest of the world and there were signs of expectations that it would remain relatively low, such a marked nominal depreciation exceeded what was needed to restore a reasonable competitive situation. having previously been overvalued, the real exchange rate accordingly swung abruptly to an undervalued level and remained there for a long time. other currencies that had been obliged to float in connection with the crisis in 1992 — the finnish markka and the italian lira — also weakened more than was motivated by long - term considerations. gradual stabilisation a major factor behind the krona ’ s initial depreciation was no doubt uncertainty about the swedish economy and economic policy. the grave problems with government finances, together with uncertainty about inflation ’ s future path, contributed to this. in the early years with the flexible exchange rate the path of the krona was less susceptible to current inflation or demand. a simple regression analysis shows that the confidence of market agents in swedish economic policy and price stability — measured as the long - term interest rate differential with germany — can explain almost a third of the nominal exchange rate ’ s variability since 1992. in the period from 1994 to 1996 the swings in credibility, measured in this way, actually explain almost twothirds of the exchange rate movements. in this uncertain environment, with a lack of credibility, the impact of international turbulence on swedish interest rates and the exchange rate was accentuated. the nervous mood in international financial markets in connection with the federal reserve ’ s monetary tightening in 1994 and the crisis in mexico at the end of that year added to the krona ’ s depreciation and widened interest rate differentials. a similar pattern was observed in other countries with a