t t mboweni : recent economic developments and monetary policy in south africa address by mr t t mboweni, governor of the south african reserve bank, at the mercury / safmarine business breakfast, durban, 14 may 2004. * 1. * * introduction ladies and gentlemen. since september of 2003, monetary policy in south africa has succeeded in maintaining cpix inflation within the specified 3 - 6 per cent target range. this was achieved less than a year after inflation had peaked at over 11 per cent in november of 2002. this success was a result of the monetary policy reaction to the inflation surge in 2002 following the depreciation of the rand in late 2001, as well as other favourable developments, both domestically and internationally. this morning i will review some of the recent economic developments, both positive and negative, that have contributed to the favourable inflation outcomes of the recent past. however monetary policy should not dwell on the past. monetary policy should be, and in fact has been, forward looking, and i will, therefore, highlight some of the risks and challenges to monetary policy in the future. 2. international economic developments after a number of false starts, the world economic recovery was well under way in the latter half of 2003, particularly in the united states and asia. real growth in the us had risen to 3, 1 per cent in 2003, and the latest imf world economic outlook forecast is for 4, 6 per cent growth in 2004. the recovery has been accompanied by high levels of productivity growth, and more recently by increases in employment. the japanese economy appears to have emerged from a protracted period of low or negative growth, and this has provided an additional stimulus to the asian region. recent suggestions of a possible slowdown in china have raised fears that the generalised recovery is under threat. this has had a negative impact on commodity prices in recent weeks. these fears are likely to be exaggerated, as china still has enormous growth potential. although chinese growth may decline from its unsustainably high levels, the country is likely to remain an important and dynamic engine of economic growth internationally. of greater concern to south africa is the low growth in the euro area, south africa ’ s largest trading partner. growth in the euro area was 0, 4 per cent in 2003 and although there are encouraging signs that some of the countries in the region are beginning to recover, growth is only expected to reach 1, 7 per cent in 2004. the united kingdom, latin america, aus

have taken a moment here to rest, to steal a view of the glorious vista that surrounds me, to look back on the distance i have come. but i can rest only for a moment, for with freedom come responsibilities, and i dare not linger, for my long walk is not yet ended. ” i love freedom!!!!! even central bank governors love freedom!!!! tonight, i salute our country! i salute our people! poor as they might be, they have political power in their hands. hold on to that dear people, don ’ t let that slip away no matter how hard things might be. you are my boss, for which i am eternally grateful. and so, here is to ten years of freedom!!! may we have many, many more years of freedom!!! thank you very much bmf for what you are doing for us all. thank you.