and open economy, would not be able to avoid the spillover effects thereof. the only thing which was uncertain was the magnitude of the spillover. indeed, domestic economic activity had already started to slow on account of tighter monetary policy applied between 2006 and 2008, resulting in slowing domestic demand. however, the real impact of the decline in global growth started to be felt in the fourth quarter of 2008, when for the first time in a decade, the domestic economy contracted. in the first quarter of 2009, the domestic economy officially entered into a recession and a third consecutive quarter of negative growth was recorded in the second quarter of this year. south africa was somewhat lagging the rest of the world. initially, the declines in economic activity were concentrated in the manufacturing sector, but as international conditions deteriorated, the slowdown filtered through to other sectors as well. the strongest contractions were recorded in the export - oriented sectors. virtually all sub - sectors of the manufacturing industry were adversely affected and manufacturing output contracted by almost 20, 0 per cent in the first half of 2009. significantly reduced demand for basic metal and mineral products as well as lower international commodity prices weighed heavily on output in the mining sector, which contracted by almost 17, 0 per cent. the performance of the mining sector in the first half of 2009 was not that significantly different to the first half of 2008, when it contracted by 11, 0 per cent mainly as a result of power supply problems. the tertiary sector was weighed down by a contraction in output by the financial services sector, contracting for the first time since 1992, as credit extension slowed and capital market activity was subdued. consequently, all three major sectors – primary, secondary and tertiary – recorded negative real growth in the first half of 2009. it came as no surprise then that the labour market shed jobs on a broad front, but most notably in the manufacturing, construction and mining sectors. following a period of robust growth between 2004 and 2007, employment in both the private and public sectors increased, pushing the unemployment rate down from 28 per cent in 2004 to 21, 9 per cent in the fourth quarter of 2008. in the second quarter of 2009, the unemployment rate unfortunately increased to 23, 6 per cent. the reuters consensus forecast estimates that the economy will contract by around 2, 0 per cent in 2009, 1 before growing at 2, 3 per cent in 2010. based on the composite leading business indicator, which has been increasing for the last few months, we may emerge from the recession

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.