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PORTFOLIO AND
SELECT
COMMITTEES ON
FINANCE
October
2004
RECENT ECONOMIC
DEVELOPMENTS
International
Economy
International oil price
World economic outlook: Real GDP
Annual

percentage change in real GDP
Actual
Projections
2003
2004
2005
3,9
2,1
3,0
2,5
0,5
2,2
5,0
3,6
4,3
4,4
2,2
3,4
4,3
2,9
3,5
2,3
2,2
2,5
3,0
5,5
4,0
6,1
4,3
4,5
7,7
1,8
6,6
4,5
5,5
7,6
4,6
5,9
5,4
4,8
6,9
3,6
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
World
Advanced economies
USA
Japan
Euro area
United Kingdom
Newly industrialised Asian
economies 1)
Emerging market and
developing countries
Africa
Central and eastern Europe
Developing Asia
Western hemisphere

1) Includes Hong Kong SAR, Korea, Singapore and Taiwan Province of China.
Source: IMF World Economic Outlook, September 2004

World economic outlook: Consumer prices
Annual

percentage change in consumer prices
Actual
Projections
2003
2004
2005
3,8
2,1
3,0
-0,2
2,1
1,6
3,6
2,1
3,0
-0,1
1,9
1,9
2,4
2,6
6,0
8,6
6,9
4,0
6,5
5,5
8,1
5,9
4,1
6,1














World
3,7
Advanced economies
1,8
USA
2,3
Japan
-0,2
Euro area
2,1
United Kingdom
1,4
Newly industrialised
Asian economies 1)
1,4
Emerging market and
Developing countries
6,1
Africa
10,3
Central and eastern Europe 9,2
Developing Asia
2,6
Western hemisphere
10,6


1) Includes Hong Kong SAR, Korea, Singapore and Taiwan Province of China.
Source: IMF World Economic Outlook, September 2004
Key central bank interest rates


Countries 1 January 2004

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









USA
1,00
Japan
0,00
Euro area
2,00
United Kingdom 3,75
Canada
2,75
Denmark
2,00
Sweden
2,75
Switzerland 0 – 0,75
Australia
5,25
New Zealand
5,00
Israel
4,80
Hong Kong
2,50
Malaysia
4,50
South Korea
3,75
Taiwan
1,38
Thailand
1,25
30 September 2004
1,75
0,00
2,00
4,75
2,25
2,00
2,00
0,25 – 1,25
5,25
6,25
4,10
3,25
4,50
3,50
1,38
1,50
Latest Change
(Percentage points)
21 Sep 2004 (+0,25)
19 Mar 2001 (-0,15)
6 Jun 2003 (-0,50)
5 Aug 2004 (+0,25)
8 Sep 2004 (+0,25)
6 Jun 2003 (-0,50)
1 Apr 2004 (-0,50)
16 Sep 2004 (+0,25)
3 Dec 2003 (+0,25)
9 Sep 2004 (+0,25)
1 Apr 2004 (-0,20)
22 Sep 2004 (+0,25)
21 May 2003 (-0,50)
12 Aug 2004 (-0,25)
26 Jun 2003 (-0,25)
25 Aug 2004 (+0,25)
Key central bank interest rates (continued)

Countries 1 January 2004
30 September 2004


India
Brazil
Chile
Mexico1
Czech Republic
Hungary
Poland
Russia

South Africa

1 The Bank of Mexico uses the money market shortage to influence liquidity
conditions, while the interest rate is market determined.
Source: National central banks

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
6,00
16,50
2,25
6,17
2,00
12,50
5,25
16,00
Latest Change
(Percentage points)
8,00
6,00
29 Apr 2003 (-0,25)
16,25
15 Sep 2004 (+0,25)
2,00
7 Sep 2004 (+0,25)
7,95 24 Sep 2004 (+6 mil pesos)
2,50
26 Aug 2004 (+0,25)
11,00
16 Aug 2004 (-0,50)
6,00
25 Aug 2004 (+0,50)
13,00
15 Jun 2004 (-1,00)
7,50
12 Aug 2004 (-0,50)
RECENT ECONOMIC
DEVELOPMENTS
National Economy
Real gross domestic product
Real gross domestic expenditure
Real final consumption expenditure
by households
Real household disposable income
Household debt as percentage of household
disposable income
Real gross fixed capital formation
Real domestic final demand
Change in inventories
Gross saving as percentage of gross
domestic product
Non-agricultural employment
Non-agricultural nominal remuneration
per worker
Non-agricultural labour productivity
Non-agricultural nominal unit labour cost
Nominal unit labour cost in manufacturing
All-goods production prices
Headline inflation and CPIX
Exchange rates of the rand
Growth in M3
Total loans and advances extended to
private sector
Money-market interest rates
Yield on long-term government bonds
Share prices - all classes
Summary

Strong world demand of petroleum and petroleum
products has led to crude oil prices reaching
unprecedentedly high levels in this quarter.

The sharp increases in oil prices, steady decline in
output gaps across the world among other factors
have caused the IMF to lower its global growth
forecast for 2005.

If growth in advanced economies most of which
are our major trading partners is projected to
decline in the next 12 months, as it is, that may not
auger well for South Africa’s economic prospect from the external accounts perspective.
Summary (Continued)

Domestic demand remains the key driver of South
Africa’s output growth, in this growth phase of the
business cycle.

Favourable manufacturing output and agricultural
and mining production signal a continuation of the
consolidation phase of the South African economy.

Lower interest rates, moderately wider budget
deficit and an improvement in the country’s
international terms of trade have contributed to the
country’s current growth performance.
Summary (Continued)

When CEO’s of major firms; say that higher
consumer spending is the result of a structural
rather than just a cyclical improvement in the
economy, the record level of consumer and
business confidence is probably not misplaced.

Growth performance in the first half of 2004 have
seen employment in the second quarter of 2004
picking up by about 5 per cent - an expansion in
employment occurred in both the private and
public sector.
Summary (Continued)

On the prices side, the targeted CPI variant, CPIX,
has remained within the target range for about 12
months to date. Our short-term forecasts,
consistent with the consensus, show that inflation
will remain within the target range in the near
term.

Higher oil prices, increases in domestic demand
growth over income and some base effects in
August of next year may inject undesirable
pressures on the inflation front and output.
Summary (Continued)

Huge as the deficit on the current account of the
Balance of Payments was in the second quarter of
2004, it was however adequately financed by
capital inflows from the rest of the world - allowing
the South African Reserve Bank to continue
“creaming off” part of these flows to add to the
country’s accumulated foreign exchange reserves.

We expect continued deceleration in growth
across the spectrum of the monetary aggregates currently well aligned with robust economic activity
- though not consistent with inflation targeting
range.
Thank you