Fundi Tshazibana: Global shifts and regional spillovers – how are we performing?

Address by Ms Fundi Tshazibana, Deputy Governor of the South African Reserve Bank, at the Central Bank of Eswatini, Mbabane, 17 November 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Ladies and gentlemen, thank you for the opportunity to address you today at this event hosted by our colleagues at the Central Bank of Eswatini. The relationships between our respective central banks go back a long way – after all, the Common Monetary Area (CMA) of Southern Africa is the oldest existing currency union in the world, dating back to the beginning of the 20th century. The deep economic ties between the economies in the CMA, and our pegged exchange rates, underscore a high synchronisation in our economic cycles, especially in responding to the impact from global shocks, trends and spillovers to the African region – a central theme of my talk today.

The past three to four years have seen many global shocks, and their ramifications continue to reverberate. In fact, we are still uncertain about the long-term effects these shocks will have on the world economy, trade and capital flows. While the COVID-19 pandemic may no longer be a major health concern, we still face a world of relative price shifts, high inflation, re-organisation of supply chains and increasing geopolitical risks. Encouragingly, both the global economy and our regional context have shown some resilience to these shocks. But some effects might come with a lag and complicate the task we, as central banks, face in maintaining price stability and financial stability. These are some of the issues I will try to address today. 

Some encouraging global developments

We are all well aware of the inflation surge experienced globally in 2021 and 2022, driven by supply and demand mismatches that emerged as economies reopened in a staggered manner after the COVID-19-related lockdowns. During this period, advanced economies experienced inflation levels not seen since the early 1980s. To limit the permanent release of the inflation genie out of the bottle, advanced economy central banks had to act decisively by raising rates to levels last seen before the 2008 Global Financial Crisis. 1 In emerging market and developing countries, most central banks had to tighten too, though the degree of the policy response varied considerably based on idiosyncratic factors.