South Africa's reserve bank and its chairperson, Tito Mboweni, were yesterday commended by Harvard University economics professor and former IMF economist Kenneth Rogoff, for an “enormously successful” monetary policy, which, he said, should serve as an example for other developing markets.

Speaking at a precious-metals conference in Johannesburg yesterday, he added that the rand has emerged as a key commodity currency, on par with those of countries like Canada and Australia.

In a speech on the global outlook and its implications for the dollar, commodity currencies and commodities, Rogoff said that the long-term outlook for the global economy is bullish, but that the same could not be said for the dollar.

“The short-term scenario is also very strong but there are issues and imbalances, which suggest we might see a severe global recession in the medium term,” he cautioned.

Over the last 15 to 20 years, the trend has been towards short and shallow recessions, with global economic expansions proving more lasting, he said.

“But, as expansions continue, vulnerabilities grow, and there is evidence to suggest that a global recession can be expected in the region of 2008 to 2010,” Rogoff indicated.

Positive developments include that rising productivity trends appear widespread and sustained, and inflation everywhere in the world is "astoundingly" low, he said.

This is partly due to globalisation, as well as improved monetary and economic institutions.

GDP growth has also become less volatile.

While there have been intimations that this is due to a global 'savings glut' Rogoff suggests it is rather linked to downward shifts in investment.

However, despite these encouraging trends, there remain significant risks to the global economy.

The first of these is the global security situation, particularly with reference to terrorism, Rogoff said.

The second area of concern is around energy prices and, while these clearly have less impact than previously, the enormous potential for price volatility remains worrying.

On the concern of an emerging global housing bubble, Rogoff said that, while there is a slowdown in the market, signs of a pending hard landing have not yet appeared.

“Nonetheless, it remains a central concern,” he said.

The fourth area of unease relates to the steep rise in global interest rates.

China also continues to show huge imbalances, with investment levels at some 45% of GDP and signs that the Chinese government appears more concerned with social than economic stability.

Rogoff said that he expects further liberalisation of the Chinese exchange-rate regime in the near term, probably coinciding with US President George W. Bush's upcoming visit to the country.

Possibly the most concerning factor in the global economic situation is the US current-account deficit, which accounts for three-quarters of the total world current-account deficit at the moment.

“An end will have to come, and when it does, there will need to be a large adjustment to the dollar,” Rogoff said.

He said that the recent US interest-rate rise is temporary, and that the cycle will eventually come to an end and begin to reverse on the recent trends.

The new chairperson of the US Federal Reserve Board, Ben Bernanke, is also expected to bring rates down sooner rather than later.

“Nonetheless, the trade-balance overhang remains deeply problematic,” Rogoff said.

“And, if the US trade deficit would be reduced by half, Asian currencies could be expected to rise by 18% against the dollar and non-Asian by between 5% and 10%,” he intimated.

However, the global outlook is for continued high growth, with China and the US continuing to lead, although at a slower pace, he concluded.