While the global ‘reserve army of labour’ has long kept inflation down in the advanced countries, thereby preventing the inflationary potential inherent in the strong global accumulation of liquidity in recent years from materialising, an equally exogenous factor such as an energy price shock could trigger it.
At the same time, significant inflows of financial capital have been recorded over the past three years, exceeding the currentaccount deficits and enabling the South African Reserve Bank to increase the gold and other foreign exchange reserves. Export volumes are also expected to continue benefiting from the projected global growth, the African Growth and Opportunity Act, and Government’s Motor Industry Development Programme.