South Africa's domestic economy's growth prospects look positive, said SA Reserve Bank governor Tito Mboweni.

After listing the country's recent economic developments, Mboweni said, "It can be concluded that domestic growth prospects seem positive."

He was speaking at the School of Economics awards evening at the University of Pretoria on Thursday.

In a speech prepared for delivery on Thursday, and issued yesterday, Mboweni said, "The exchange value of the rand remains firm, and the improved foreign exchange reserve position could contribute to rand strength and stability."

He said the exchange rate of the rand against a basket of currencies strengthened by 16% last year and had appreciated by another 8,2% in the first six months of 2004.

Inflation appeared to be under control, he said.

"In general most factors favour a containment of inflation within the target range, and market participants also seem to be scaling down inflation expectations."

He warned, however, that fluctuations in the oil price internationally could impact on domestic fuel costs. This could force inflation figures up.

If so, this could mean the rate of increase in CPIX (year-on-year consumer inflation less mortgage costs) "could temporarily breach the upper level of the target range towards the end of 2004 and the early part of 2005".

The governor said monetary policy would continue to be focused on inflation trends and "policy decisions will be guided by the mandate to maintain CPIX inflation within the target range". – Sapa.