keynote address by daniel mminele, deputy governor of the south african reserve bank, at the 2019 bnp paribas global official institutions conference paris 19 june 2019 the global backdrop and monetary policy in emerging markets introduction ladies and gentlemen, good afternoon. thank you to bnp paribas for allowing me the honour to deliver the opening keynote address at this prestigious gathering of global official institutions. also allow me to commend the organisers of this event for their foresight in coming up with diverse and well - balanced topics that have risen to the top of the global agenda. there is no doubt in my mind that, at the present moment, uncertainty in the global macroeconomic environment, including rising geopolitical uncertainties, elevated trade tensions and rising debt levels, dominate the discussions of most global investors and policymakers. in my remarks today, i will discuss the implications of these developments for emerging market economies and the possibility of further risk from market volatility, before i conclude by touching on the policy options at our disposal to navigate through these rather turbulent times. page 1 of 10 an uncertain global economic environment investors and policymakers alike have had a nervous last few months. it is often said that expansions do not die of old age. yet, as they lengthen in duration, reaching nearrecord periods in some cases, observers increasingly worry about whether the trigger of the eventual downturn is already there. are we in such a case at present? in his foreword to global economic prospects published earlier this month, world bank president david malpass writes that ‘ global growth has continued to weaken and momentum remains fragile ’ 1. compared to its january forecast, the world bank has this month downgraded its forecast for global growth in 2019 by 0. 3 percentage points to 2. 6 %. furthermore, it sees only a mild recovery ahead, to 2. 8 % by 2021. revisions to this year ’ s forecasts are broad - based, across both advanced and emerging economies. private sector consensus forecasts have similarly been scaled down in recent months. in some countries, a moderation was expected after the strong momentum observed in late 2017 and early 2018. in the united states ( us ), for instance, economists anticipated that the boost to private spending from the fiscal stimulus of the first half of 2018 would eventually fade. this has indeed happened, although the us economy remained dynamic at the start of 2019, rising by a surprisingly strong 3. 1 % when annualised, despite a

an environment of heightened uncertainty. in light of the growing fiscal risks and increased domestic financial market volatility, the mpc has to be cognisant of the possibility that the inflation outlook could deteriorate further. the mpc also has to weigh the risks i have outlined earlier, including the possibility that the global environment could turn less favourable, which, in the current circumstances, could exacerbate the downward pressure on domestic financial assets. at the end of the day, the mpc is well aware of the current weakness in economic growth, with continued downside risks, and will, wherever possible within its mandate, strive to support an improvement in economic activity through an appropriate monetary stance. however, in an environment characterised by elevated uncertainty, where inflation expectations could become unanchored, the best approach for the sarb is to minimise the number of threats to price and financial stability. consequently, the mpc will continue to closely monitor both global and domestic developments as well as their implications for the inflation outlook, and will act accordingly. conclusion while acknowledging that five weeks can be a long time in economies and markets, i think we can reasonably safely already draw the conclusion that the global backdrop in 2017 proved to be more benign than many had anticipated. for the first time in many years, the outlook is finally looking promising, with global growth gathering momentum, without yet generating too much inflation. financial markets have generally performed well. south africa faced a particularly challenging domestic environment, which affected growth performance, mainly because of low business and consumer confidence. we failed to fully take advantage of the global cyclical upswing. the inflation outlook improved during the year, and inflation is expected to be inside the target range over the forecast horizon. but more recently upside risks to the inflation outlook have been intensifying, which will require careful monitoring. page 11 of 12 as niels bohr said : “ prediction is very difficult, especially if it [UNK] s about the future ”. we do not know what 2018 has in store for us, and how the global risk profile will unfold. the relatively benign global backdrop in 2017, should not make us complacent, but rather encourage us to take advantage of the current cyclical economic upswing to strengthen our structural reforms and implement growth - friendly policies that are needed to boost economic growth and create employment. in south africa, 2018 provides an opportunity to press the “ reset button ” and, through a collaborative approach, to try and break the self -