No MPC meeting called yet - Mboweni

Thursday, February 26, 2009

Johannesburg - Reserve Bank Governor Tito Mboweni says no emergency meeting of the Monetary Policy Committee (MPC) has been convened as yet.

"There is no meeting of the MPC that has been called, but the MPC can meet anytime.

"If the MPC is going to meet, we will make sure people are informed so that they can make informed decisions.

"The MPC does not take decisions based on a single number [such as January's inflation figure], and does not take decisions based on historical data as our task is to look forward, and monetary policy does not work backwards but forwards," Mr Mboweni told investors and bankers on Thursday.

Wednesday's inflation figure of 8.1 percent is indicative of a very nice slowdown in inflation, he said.

Given that the world economy is busy retracting and the output gap is widening, there is less pressure on the demand side which automatically lessens inflation, Mr Mboweni said.

Globally the inflation rate is expected to come down quite significantly, with emerging markets inflation expected to be 5.8 percent in 2009.

The year of 2008 was not a particularly good year for economic growth in South Africa with fourth quarter growth in negative territory, and while this is something to be noted, it should not alarm people, he said.

The Reserve Bank Governor said the Minister of Finance Trevor Manuel and the team of the National Treasury indicated recently that they expected Gross Domestic Product Growth (GDP) of 1.2 percent in 2009, but that he was remaining cautious predicting either plus of minus 1.2 percent.

"A lot of support for the economy is being provided by the large infrastructure programmes, and were it not for these infrastructure developments we would be in some trouble," he said.

South Africa's manufacturing sector was in recession, but again given the contraction in the global economy this was not surprising because who could South Africa sell to.

The South African economy is not isolated as many initially thought but are in fact part and parcel of the world economy.

All of us are aware, he said, that the US economy began its recession round about the fourth quarter of 2007, and that due to its size, the rest of the world was likely to be dragged by it.

Japan has also been in a very severe recession almost since 2007, and the Japanese economy, he said, adding Europe is also in a deep recession.

"Europe is very important to us as it is one of SA's biggest trading partners. Other commodity producing countries like Canada and Australia area also coming to a recession," Mr Mboweni said.

All global indicators are in negative territory and it is predicted that most Organisation for Economic Cooperation Development (OECD) countries are going to run into recession, he explained.

The World Bank is releasing a report indicating the world economy is expected to grow by a tiny 0.5 percent in 2009.

Africa and India is expected to grow by 3.4 and 5 percent, respectively, while China is also expected to have growth of 7.5 percent in 2009.

The US is predicted to have -1.6 percent growth, Japan is expected to have -2.6 percent growth, while the United Kingdom will also have -2.8 percent growth, Mr Mboweni said.

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