Quarterly Press Conference

1. Quarterly Press Conference 2009 OUTLOOK:INVESTING IN ASLOW-GROWTH WORLD 27 January 2009

2. Economic Outlook: Rian le RouxChief Economist, OMIGSA“The global slowdown and its impact on SA”

3. 30 30 SA leading indicators Trading partner leading indicators 20 20 10 10 0 0 -10 -10 -20 -20 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 SA closely linked to the global economic cycleFit has tightened since the end of isolation from early 90’s Source: SA Reserve Bank

4. 15 75 SA’s big 4 commodity export price index, % ch Trading partner leading indicators, % ch 10 50 0 0 -10 -50 -15 -75 86 89 92 95 98 01 04 07 10 Transmission mechanism from global to SA via commodity prices, export volumes, rand and interest rates

5. SA export volumes & global GDP growth 20 10 World GDP growth SA export volume growth (ex gold) 10 5 0 0 -10 -5 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

6. SA car exports: Global slump starting to show 000’s per month 40 40 30 30 20 20 10 10 0 0 95 97 99 01 03 05 07 09

7. 30 30 Prime rate 20 20 10 10 0 0 Trading partner leading indicators -10 -10 85 88 91 94 97 00 03 06 09 SA interest rates and the global cycleEarly rise in local rates probably prevented an acute rate crunch

8. 10 10 Current account as % of GDP 5 5 0 0 -5 -5 -10 -10 85 87 89 91 93 95 97 99 01 03 05 07 09 Current account deficit remains a risk to the rand and interest rate outlook

9. Deep and broad-based recession (across sectors and economies): - Some really shocking real economy numbers - Round 2 of the financial crisis? Classic forecasting error occurring: - Trend predicted correctly (downturn), extent hugely underestimated - Causing ongoing financial market concern Current global picture

10. Some shocking numbers reflect the unexpected severity of the global slump 1400 450 Total: -10% from peak Ex autos/gas: -4½% from peak 400 1200 300 1000 200 800 100 600 90 92 94 96 98 00 02 04 06 08 10 90 92 94 96 98 00 02 04 06 08 10 US retail sales, nominal $ bn Japan machinery orders, yen trn

11. Global trade collapsesExternal trade growth China USA 30 60 Exports Exports Imports 50 Imports 20 40 30 10 20 0 10 0 -10 -10 -20 -20 98 00 02 04 06 08 98 00 02 04 06 08

12. GDP forecasts for 2008 & 2009Despite deep forecast cuts, risks remain to the downside 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 6 6 2008 2009 4 4 2008 2009 2 2 0 0 Economist survey -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 07 08 09 07 08 09 G7 Developing world

13. World GDP & consensus forecasts % ch 10.0 10.0 Emerging economies World 7.5 7.5 Developed 5.0 5.0 2.5 2.5 0.0 0.0 -2.5 -2.5 80 83 86 89 92 95 98 01 04 07 10

14. Current global picture From inflation worries to deflation panic

15. Global inflation: falling fast Y-o-y % change Y-o-y % change 8 20 Germany Greece Russia Malaysia SA Canada UK Japan Saudi Arabia Mexico USA Switzerland Estonia Thailand 6 Italy Belgium Turkey Brazil 15 France Australia Israel Singapore Sweden China 4 10 2 5 0 0 -2 -5 06 07 08 09 06 07 08 09

16. Current global picture Policymakers pulling out all the stops

17. Rates cut aggressively over a broad frontFiscal packages close to 2% of Global GDP 30 20 Euro SA USA China UK Poland Australia 20 Korea Japan 10 Hong Kong 10 0 0 -10 -10 90 93 96 99 02 05 08 90 93 96 99 02 05 08

18. Current global picture Key questions:- Will it work?- If so, when will things start to stabilise?- How deep the downturn in the meantime?: Big worries here History suggests that sudden & deep slumps are typicallyfollowed by sharp recoveries – will this one be different?

19. Recoveries, when they come, can be quickSignificant obstacles this time, but surprise potential is risingRisk is more severe weakness first 10 10 US employment (% change) 5 5 0 0 -5 -5 51 56 61 66 71 76 81 86 91 96 01 06 11

20. World GDPConsensus forecasting reasonable recovery in 2010 % change 10.0 10.0 Emerging economies World 7.5 7.5 Developed 5.0 5.0 2.5 2.5 0.0 0.0 -2.5 -2.5 80 83 86 89 92 95 98 01 04 07 10

21. SA Outlook for 2009 No escaping the global downturn, but SA is partly isolated: - No local financial sector crisis or serious credit crunch - Exchange rate lends welcome protection - Infrastructure drive will lend crucial support to the economy - Falling inflation will boost real household incomes - Lots of policy firepower available (monetary and fiscal) Difficult conditions in H1:- Some sectors in deep recession (motor, residential construction, mining, exporters, small business) Some improvement in H2:- Lower interest rates, lower petrol price, lower general inflation & fiscal measures should support consumer spending- Government infrastructure drive to maintain momentum

22. Downside risks can not be ignored, though Severe export slump Private investment slump Job shedding Rand slump Policy error

23. SA vs Global GDP growthNo escaping the global slump, but SA a little better protected this time 10 10 World GDP growth SA GDP growth 5 5 0 0 -5 -5 -6 -6 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

24. Welcome support from investment 20 20 World GDP growth SA GDP growth Investment growth 10 10 0 0 -10 -10 -20 -20 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

25. Welcome support from investment 30 30 World GDP growth SA GDP growth Investment growth 20 Public sector investment growth 20 10 10 0 0 -10 -10 -20 -20 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

26. SA Inflation picture 40 40 CPIX petrol Food 30 30 CPIX CPIX excl food & petrol 20 20 10 10 0 0 -10 -10 -20 -20 00 02 04 06 08

27. SA Inflation outlook 40 40 CPIX petrol Food 30 30 CPIX CPIX excl food & petrol 20 20 10 10 0 0 -10 -10 -20 -20 00 02 04 06 08

28. Food inflation: Stabilising? Y-o-y % change 50 50 Stats SA 40 40 ERU 30 30 20 20 10 10 0 0 -10 -10 -20 -20 95 97 99 01 03 05 07 09 Meat, vegetables & fruit

29. Inflation forecast 14 14 • Forecast with new weights & rebasing • Assumptions: Rand: 9.75 end ’09 Oil: $60/bbl end ’09 Food: 8% end ’09 Eskom: 30% ’09; 30% ‘10 12 12 10 10 8 8 6 6 4 4 2 2 97 99 01 03 05 07 09

30. Interest rate outlook350 bps of cuts in the cycle – risk is faster & more cuts 30 30 Prime rate & Base Case forecast Alternative Scenario 25 25 20 20 15 15 10 10 5 5 0 0 90 92 94 96 98 00 02 04 06 08 10

31. SA Macro forecasts for 2008-2010 updated : 07.01. 2009

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