an address by lesetja kganyago, governor of the south african reserve bank ( sarb ), at the 100th annual ordinary general meeting of the sarb shareholders south african reserve bank, pretoria 31 july 2020 global economic conditions we mark the 100th annual ordinary general meeting ( agm ) of the south african reserve bank ( sarb ) at a time when the world is facing one of the most disruptive and challenging crises in recent memory. the covid - 19 pandemic has placed significant pressure on the global as well as domestic economies, and the livelihoods of citizens. the unprecedented restrictions imposed by countries to try and contain the spread of the virus have contributed to plunging economic activity, ending the global economic expansion that had started in 2010. in its latest update on the world economic outlook, the international monetary fund ( imf ) estimates that global gross domestic product ( gdp ) will contract by about 4. 9 % in 2020. the world bank highlights that this will be the deepest global contraction since 1945, with a record 93 % of the world ’ s economies expected to experience economic contraction this year. the decline in global gdp has been compounded by increased risk aversion and extreme volatility in financial asset prices, with sharp and deep market selloffs. business and consumer confidence has also fallen as uncertainty levels reached page - 1 - of 9 new highs. resource - exporting economies and countries with a high reliance on debt markets for funding will become even more vulnerable if capital continues to flow out of emerging market economies. the global policy response has matched the magnitude of the crisis. fiscal authorities have contributed by delivering stimulus packages that are estimated to be larger than the response to the global financial crisis of 2008 and 2009. this stimulus has provided support to the health sector and to vulnerable households and businesses. central banks around the world responded swiftly by lowering interest rates and providing liquidity to maintain market functioning. these response measures have helped to ease global financial conditions, allowing governments and companies to continue accessing domestic and international financial markets, and thus being able to sustain business operations and provide support to households. as a consequence, the high - frequency indicators suggest that the gradual lifting of lockdown restrictions in the major economies ( first china, then europe ) has seen a rebound in manufacturing production and retail spending. while major economies in asia and europe appear to be on the road to recovery, the united states ( us ) and most of the emerging world are still very much in the midst of the crisis.

was marked by further enquiry into monetary policy frameworks. the early 2000s saw our biggest policy shift, the adoption of the inflation - targeting framework. at the time, south africa was the 13th country to introduce this policy framework. the governor at the time, tito mboweni, was tasked with guiding the sarb through this uncharted territory. our inflation target, set by the minister of finance in consultation with the sarb, is between 3 % and 6 %. the adoption of inflation targeting saw a radical change in the way in which the sarb communicated with the public, focusing on transparency through communication, and ensuring that independence and accountability worked hand in hand. the flexibility of the inflation - targeting framework and its anchoring of public expectations about inflation assisted the country to weather the global financial crisis in 2008 and 2009. with the critical role of financial institutions in that crisis underscored, governor gill marcus helped expand the sarb ’ s mandate to explicitly include financial stability. in doing so, a financial stability committee was formed and resources expanded for its work. the early 2010s also saw cabinet approve the move towards the twin peaks model. the financial sector regulation act was signed into law on 21 august 2017, paving the way for the formation of the prudential authority. in april 2018, the prudential authority was officially launched, amalgamating the sarb ’ s bank supervision department, the insurance division of the financial services board and the supervisory team of the co - operative banks development agency. the sarb was born at a time when the world was exiting the devastating impact of the 1918 spanish flu pandemic. as we approached our centenary year, the world began grappling with the great flu pandemic of our time, the coronavirus disease 2019 ( covid - 19 ) pandemic. as covid19 cases began to rise, south africa, like many other countries, mandated forceful containment measures to abate the human cost associated with the virus. while these measures minimised the impact on human lives, they came at a great cost to the economy. south africa ’ s real gross domestic product contracted by a substantial 7. 0 % in 2020. this was the second - largest annual contraction since 1920, and about five times larger than the contraction following the global financial crisis in 2009. unemployment recorded its highest level since statistics south africa began measuring unemployment. both headline producer and consumer price inflation recorded historic annual average lows of 2. 5 % and