Remarks by Mr TT Mboweni, Governor of the South African Reserve Bank at the Annual Dinner in honour of the Ambassadors and High Commissioners accredited to the Republic of South Africa. 24 November 2005. Pretoria  Your Excellency, the Dean of the Diplomatic CorpsYour Excellencies, Ambassadors and High CommissionersYour Excellency, the Chief of State ProtocolYour Excellencies, Heads of International Organisations represented in the Republic of South AfricaDeputy Governors of the South African Reserve BankSenior officers of the South African National Defence ForceSenior Management of the South African Reserve Bank and their spouses/partnersEditors and other media representativesLadies and GentlemenDear Friends Welcome once again to this annual dinner in honour of the Ambassadors and High Commissioners accredited to the Republic of South Africa. It has been yet another challenging year for South Africa on many fronts, and although you are no doubt familiar with many of these issues, I wish to highlight briefly the most noteworthy international and domestic financial and economic developments that have transpired since the Bank was honoured by your presence last year. Economic and financial conditions in the international economy have remained generally benign in recent months although there have been a number of challenges. Led primarily by China, India and the United States, the world economy continued to grow at a solid rate although growth projections for 2005 in most countries have been revised downward slightly – with the important exceptions of key Asian economies. The major global imbalances, such as the difference between the US and Asian propensities to save, show no significant signs of reversal. However, underlying inflationary pressures in most countries generally have remained muted, resulting in little transmission of price pressures to the South African economy. Real gross domestic product growth in the US economy remained strong during the first three quarters of 2005. However, real economic growth in the euro area, South Africa’s largest trading partner, was comparatively disappointing, while growth in most developing countries exceeded expectations. The relatively strong world economy, favourable prices of commodity exports and improved policies contributed to an acceleration in growth on the African continent. Non-oil commodity prices have continued to rise during 2005, with strong demand for metals from the US and China -where the manufacturing and construction sectors are recording robust growth - driving prices higher. Prices of iron ore, copper and uranium in particular have risen significantly in recent months. The gold price in dollar terms has also shown a significant increase over the same period as a result of fears of rising global inflation; concerns about geopolitical security; mounting speculation regarding a possible reversal in central bank gold sales; declining mining supply; and strong fabrication demand for gold. Global real gross domestic product grew by about 5 per cent in 2004 and is projected to increase by 4½ per cent in 2005. Growth in some of the developed economies slowed in the second quarter of 2005 while emerging-market economies continued to record robust growth. However, to date the impact on global growth of higher oil prices has been moderate, reflecting in part the fact that higher oil prices have been largely the result of strong global demand. Even though core inflation rates have remained benign, overall inflation rates in most countries have already increased somewhat in response to the sharp rise in oil prices. The world economic outlook therefore remains somewhat clouded by large global imbalances and rising crude oil prices. Crude oil prices have risen significantly over the past year and have on occasion touched US$70 per barrel. This can mainly be related to robust demand for oil emanating from particularly the economies of China and the US, notable supply side shocks emanating from the hurricane season, and continued geopolitical concerns. The oil price is likel