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The GDP data released this morning shows the seasonally adjusted real gross domestic product (GDP) at market prices for the third quarter of 2009 increased by an annualised rate of 0.9 percent compared with the second quarter of 2009, suggesting that South Africa has turned the corner on the economic cycle and that we are technically out of recession.

The question now is what we will do to speed up our recovery while keeping a wary eye on the formation of asset bubbles. It is significant that other G20 countries are now planning their exit strategies from expansionary fiscal and monetary policy alignments - and yet South Africa is grappling with how it should be responding, and whether the response to date has been effective. For example, the training programme for retrenched workers appears to have been a dismal failure and certainly ought to be up for review. The implication for South Africa is now the following: policy alignment is crucial to steer the economy between a second dip in economic activity and the formation of asset bubbles. The latter may seem like a good problem to have given our current situation of capital appreciation, but this situation is normally the precursor to a much more significant economic aftershock if it proceeds unchecked. According to the recently released International Monetary Fund (IMF) note on Global Economic Prospects and Principles for Policy Exit, the timing of policy should be mindful of continuing support for domestic demand. This is within a context of significant government interventions aimed towards stimulating domestic demand. The situation is not as pertinent to South Africa - the Expanded Public Works Programme is the single most significant fiscal intervention in this regard - whereas the so called economic rescue package has yet to yield results. When I attended the Inter-Parliamentary Union debate last week at the United Nations on the topic of implementing effective responses to the global economic crisis, it was clear that there is consensus in the developing world that the rules of the game need to be improved to remove obstacles that impede our growth. The United States agreed that it must reform, but that a global initiative is required. South Africa has an important role to play in this process, especially in terms of World Bank and IMF reform. South Africa can count on increased capital inflows as risk aversion dissipates among foreign investors - although the recent record high prices for gold is a mixed signal regarding short term risk appetite. What is certain is that holdings of dollar-backed securities such as US treasury bonds will steadily unwind and capital will start to move towards emerging economies such as South Africa, provided our environment is attractive enough. We certainly need the money - credit extension has been at a low point of late, suggesting that local banks will become more lenient if they can draw on foreign credit lines with more confidence. The demand for credit is certainly there and fundamentals within the domestic economy, such as the GDP, would also show that this demand is sustainable and credible in the medium to long run. All of this points to the need for the government to clearly articulate a position on the possibility of asset bubble formation and how we will deal with it. This is predominantly a monetary policy area, and yet it is likely to become significant enough to warrant a public commitment from the Treasury. I will submit parliamentary questions on this matter at the next possible opportunity.