Macro-economic review
	The 18-month period under review saw strong economic expansion worldwide, with projected aggregate gross domestic product (GDP) growth in 2004 of more than 4% – the strongest since 1988 (graph below). The main drivers of this improvement in economic performance were low real interest rates worldwide, tax cuts and improved consumer and business confidence. Whereas strong growth was experienced in the US and China, that of Europe and Japan was less robust.
	However, towards the end of the period, some deceleration in the global economic pace became evident, primarily due to weak labour markets in the major world economies, high oil prices and the fact that fiscal and interest rate stimuli were gradually being withdrawn. Another contributing factor towards this slowdown was a lack of independent growth outside the US and China, with economic expansion in Europe and the rest of Asia being primarily export driven. Growth moderation in the US and China, therefore, had a negative impact on global expansion. The depreciation of the US dollar also started exerting a negative impact on the export-led growth strategies of Europe and Asia.
	These adverse economic developments are expected to persist in 2005, leading to a further slowdown in world economic growth. Leading economic indicators and most surveys of purchasing managers from around the world also show that economic expansion has probably passed its peak. However, there is general expectation that the economic recovery will still have some staying power, especially in the US and Asia, excluding Japan. Global economic growth is thus expected to be lower in 2005 than in 2004, but still marginally above the long-term trend growth rate of 3,1% per annum.
	In South Africa, relatively strong economic growth was experienced in 2004, projected to be above 3,5%. Inflation during the year was well within the South African Reserve Bank’s target range of 3 – 6%, largely due to the appreciation of the rand against the US dollar, and persistent monetary and fiscal discipline. These positive economic conditions are expected to continue in 2005. However, the strength of the rand had a severe impact on the export earnings of the mining and manufacturing industries.
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