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South Africa’s Marcus cannot dismiss banking crisis

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The possibility of a systematic banking crisis emanating from Europe cannot be dismissed, South African Reserve Bank governor Gill Marcus said on Thursday, adding there were no obvious threats to domestic financial stability for now.

But Marcus told the bank’s ordinary general meeting the inflation outlook was being adversely affected by higher commodity prices.

While there were signs domestic recovery was becoming more sustained, recovery in advanced economies had become increasingly uncertain in recent months.

South Africa’s economy posted surprisingly strong quarterly growth of 4,8% in the first three months of this year due to a surge in manufacturing output, data from Statistics South Africa showed last month, suggesting the recovery is gaining momentum.

“The accomodative stance of monetary policy has been maintained, given the relatively hesitant nature of the domestic recovery,” Marcus said.

“There are signs that this recovery is becoming more sustained following the 4,8% annualised growth rate recorded in the first quarter of 2011.”

But Marcus noted that the recovery in developed nations, which had appeared to be more sustained, had become “increasingly uncertain” in recent months.

“While some view this as a soft patch from which countries will emerge fairly soon, there are still significant risks emanating from some peripheral countries in Europe in particular.

“These risks have the potential to derail the already slow recovery in the advanced economies and to have serious negative global repurcussions,” Marcus said.

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