, with real exports still 13 per cent lower in the first quarter of 2012 than in the third quarter of 2008, notwithstanding the recovery in trading partner country import demand to pre - crisis levels. south africa ’ s share of global exports has increased modestly since 2005, despite strong terms of trade gains, whereas other comparable countries have seen significant increases in market share. the imf estimates sa ’ s export volumes to remain around 15 per cent below their pre - crisis peaks. 6 more recent economic data reveals a softening growth momentum, pointing to a moderation in household consumption expenditure, which has been the main engine of growth thus far during the recovery. the rise in unemployment is impacting aggregate demand, while consumer confidence declined considerably in the second quarter of 2012 to its lowest level since the most recent recession. real retail sales also reflect a slowing momentum, as the strong year - on - year headline figure hides substantial base effects. apart from signs of a further moderation in growth, there are continued risks emanating from the european sovereign debt and banking crisis which have culminated in a number of emerging market countries, resuming an easing monetary policy bias and advanced economies employing further unconventional measures. the bank ’ s forecast for domestic growth has been revised lower from 2. 9 per cent in 2012 to a modest 2. 7 per cent and 3. 8 per cent in 2013. the risks to this forecast are tilted to the downside. it was against this backdrop of soft growth and moderating inflation, that the bank further reduced the repo rate to 5. 0 per cent at the most recent monetary policy committee meeting last week. as indicated in our most recent monetary policy statement, while we believe that the most recent policy action will alleviate certain pressures and will be supportive, monetary policy on its own will not overcome all the challenges that the economy is facing. while monetary policy needs to play its part and remain relevant to the context, there are limits to what monetary policy can do, and it needs to be part of a carefully defined overall macro economic policy mix. 5. conclusion i would like to end my remarks by highlighting that the inflation targeting framework has served south africa very well, both before and during the crisis. south africa has practised “ flexible ” inflation targeting, and considers all factors driving inflation, including output growth and the external environment. with financial stability also being a part of the central bank ’ s mandate, the factors to consider have grown and the universe of instruments have to be expanded. we have

fallen considerably as the uncertainty occasioned by russia ’ s war in ukraine has abated, as well as the normalisation of supply chain pressures. headline inflation is projected to average 6. 8 % in 2023 from 8. 7 % in 2022. measures of underlying inflation have, however, remained persistently high in major advanced economies, with core inflation3 declining more slowly. the rotation of demand from goods back to services that i alluded to earlier has also seen goods inflation slow markedly, while pushing services inflation higher, meaning that the stickiness in core inflation is largely a services inflation story. 4 several factors, including still elevated excess savings and unusually tight labour markets, especially in advanced economies, have also continued to support consumer demand and have possibly delayed the impact of rate hikes on aggregate demand. 1 international monetary fund, world economic outlook, july 2023. 2 consumers and businesses across major advanced economies have been grappling with rising costs, which saw headline inflation measures rising to historic highs last year. see world bank, world economic prospects, july 2023. 3 core inflation strips out the volatile components ( food and energy ) from headline inflation. 4 among the services components, rental inflation in major advanced economies has perhaps contributed the most to the stickiness in core inflation. ( fortunately, we do not seem to have that problem here in south africa, at least not for now. ) complicating the disinflation efforts is that labour markets in advanced economies have remained unusually tight, which is likely to strengthen workers ’ bargaining power and drive real wage growth above productivity gains. 5 although longer - term inflation expectations have remained anchored, headline inflation is expected to remain above the 2. 0 % target beyond 2024 in most advanced economies. inflation also remains elevated in most emerging market economies, including here at home, and is expected to decline only gradually towards central banks ’ targets by 2025. despite the recent moderation in headline inflation, risks to global inflation are assessed to be on the upside. geopolitical tensions show no signs of abating, which will likely keep global food and energy markets tight, while the probability of el nino weather conditions this year has risen sharply. monetary policy is likely to remain focused on ensuring that inflation continues to retreat, implying that global policy rates could remain higher for longer. now, let me turn my attention to developments in the domestic economy. how has the domestic economy fared? like the rest of the world, south africa has been gr