in the world economy today, investor perceptions about chinese prospects have implications for global markets. thus, it is becoming evident that chinese economic policy is no longer about china but the global economy. this was evident during the third week of april 2007 when global markets came under renewed pressure, albeit briefly, following the fourth increase in china ’ s banking sector cash reserve requirement this year. the people ’ s bank of china increased the cash reserves requirement from 10, 5 per cent to 11, 0 per cent, in addition to three interest rates increases effected over the past year. of course, global imbalances remain a key challenge. the april 2007 world economic outlook published by the imf projects that imbalances are unlikely to fall much over the short term, and therefore continued large cross - border net capital flows will be needed to finance the current account imbalances at their present levels. a disorderly adjustment of these imbalances could result in a sharp depreciation in the us dollar, thereby impacting negatively on global economic growth. it is not clear whether under these circumstances the rand would find itself moving with the dollar, or in the opposite direction. much will depend on how world growth and risk perceptions are affected in such a scenario. however, at this stage a disorderly unwinding of these imbalances appears unlikely. 7. conclusion currently the world economy is characterised by generally strong growth and low inflation. this favourable scenario has also benefited emerging markets, which are now starting to play a larger and more crucial role in the global economy. nonetheless, as we have seen on a number of occasions, markets are susceptible to changes in sentiment. thus far, negative developments stemming from changes in sentiment has generally been brief. however, sustained market moves could lead to a deterioration of growth prospects. global imbalances and the unwinding of these remain a key concern. the resilience of markets to these imbalances has continued to confound many analysts, with participants still debating how and when these imbalances will correct and the impact thereof on financial markets and the global economy. from a south african perspective, the sustainability of our current positive growth experience is dependent in part on this positive international environment. sound macroeconomic policies are essential in ensuring the continued attractiveness of south africa as an investment destination, and monetary policy will continue to play its role in this respect. while exogenous factors are outside the direct influence of domestic monetary policy, their impact through second round effects cannot

. a global economy that is expected to turn the corner in 20179 the latest imf world economic outlook ( weo ) 10 projects a pickup in economic activity over the next two years, driven by emdes which are growing at well above the world average. global growth for 2016 has been estimated at 3, 1 per cent and is projected to increase to 3, 4 per cent and 3, 6 per cent in 2017 and 2018 respectively. it is expected that advanced economies will experience a lift in activity from an estimated 1, 6 per cent in 2016 to 2, 0 per cent in 2018. the us in particular is projected to grow by 2, 3 per cent in 2017 and 2, 5 per cent in 2018, from an estimated 1, 6 per cent in 2016. much of this pickup in growth is premised on expectations of fiscal stimulus, tax reforms as well as cuts in both personal and corporate marginal tax rates. incentives to repatriate corporate profits held abroad are also likely. however, the timing as well as the actual size and mechanics of the fiscal stimulus are highly uncertain at this stage and implementation may take time. it is largely expected that the net stimulus will only take effect by 2018. on the other hand, trade policies and immigration reforms could offset these effects while there could also be a potential drag from a stronger dollar and higher longer - term interest rates. euro area growth is set to remain steady at 1, 6 per cent in both 2017 and 2018. the european central bank will be slowing its purchases of bonds from april, and while monetary policy is set to remain accommodative, the decision to slow quantitative easing has already seen the trend towards increasing negative yielding debt reverse, such that more recent numbers point to a deceleration from around us $ 13 trillion in unless indicated otherwise, all the forecasts in this section are taken from the international monetary fund world economic outlook update of january 2017. international monetary fund, a shifting global economic landscape, january 2017 2016 to us $ 9 trillion more recently. fiscal authorities appear to be increasingly open to providing fiscal support and implementing structural reforms. however, the potential banking problems in italy and the rising political risks associated with a number of upcoming elections, including in germany and france, will likely weigh in. in the uk, the economy has so far proved relatively resilient against brexit risks, but this is unlikely to be the case going forward ; indeed growth is projected to slow from 2, 0 per cent in 2016