and oecd are looking more encouraging than just a few months ago. how permanent this improvement is, however, remains to be seen. caution is warranted, nonetheless, as temporary monetary and fiscal stimulus measures may be providing a false sense of security. as for south africa, although growth continued to contract in the second quarter of this year, the pace of contraction slowed from - 6, 4 per cent in the first quarter to - 3, 1 per cent in the second quarter. the manufacturing sector appears to be turning the corner ; the purchasing manager ’ s index seems to be steadily climbing back towards the 50 threshold. businesses and consumers are also more optimistic as reflected by the confidence indices. the composite leading indicator of the south african reserve bank has been increasing during the last three, indicating that a recovery can be expected by the end of the year. 8. conclusion in conclusion, there are encouraging signs that the global slowdown may have reached its lower turning point. there remains a high degree of uncertainty attached to the speed and extent of the recovery, however, the swift manner in which authorities reacted have certainly borne fruit. developments in the south african economy are very much influenced by global economic developments. while we lagged on the way down, it is likely that we will lag on the way up. taking cognisance of the global financial and economic environment, and domestic developments with regard to growth, monetary policy will remain primarily focused on inflation management. thank you.

form of compensation, part of the prospective losses on specified portfolios of troubled assets held by banks. yet another approach would be to set up and capitalize so - called bad banks, which would purchase assets from financial institutions in exchange for cash and equity in the bad bank. these methods are similar from an economic perspective, though they would have somewhat different operational and accounting implications. in addition, efforts to reduce preventable foreclosures, among other benefits, could strengthen the housing market and reduce mortgage losses, thereby increasing financial stability. the public in many countries is understandably concerned by the commitment of substantial government resources to aid the financial industry when other industries receive little or no assistance. this disparate treatment, unappealing as it is, appears unavoidable. our economic system is critically dependent on the free flow of credit, and the consequences for the broader economy of financial instability are thus powerful and quickly felt. indeed, the destructive effects of financial instability on jobs and growth are already evident worldwide. responsible policymakers must therefore do what they can to communicate to their constituencies why financial stabilization is essential for economic recovery and is therefore in the broader public interest. even as we strive to stabilize financial markets and institutions worldwide, however, we also owe the public near - term, concrete actions to limit the probability and severity of future crises. we need stronger supervisory and regulatory systems under which gaps and unnecessary duplication in coverage are eliminated, lines of supervisory authority and responsibility are clarified, and oversight powers are adequate to curb excessive leverage and risk - taking. in light of the multinational character of the largest financial firms and the globalization of financial markets more generally, regulatory oversight should be coordinated internationally to the greatest extent possible. we must continue our ongoing work to strengthen the financial infrastructure – for example, by encouraging the migration of trading in credit default swaps and other derivatives to central counterparties and exchanges. the supervisory authorities should develop the capacity for increased surveillance of the financial system as a whole, rather than focusing excessively on the condition of individual firms in isolation ; and we should revisit capital regulations, accounting rules, and other aspects of the regulatory regime to ensure that they do not induce excessive procyclicality in the financial system and the economy. as we proceed with regulatory reform, however, we must take care not to take actions that forfeit the economic benefits of financial innovation and market discipline. particularly pressing is the need to address the problem of financial institutions that are deemed " too big to