SA not a write-off just yet, says bank

Sunday Tribune - - HERALD -

STAN­DARD Char­tered Bank hasn’t given up on the rand or South Africa yet, even af­ter the worst quar­terly eco­nomic con­trac­tion in nine years.

One rea­son for op­ti­mism is growth in house­hold wealth and spend­ing, said Razia Khan, the Lon­don-based lender’s chief econ­o­mist for Africa and the Mid­dle East.

“We know that house­holds have used the pe­riod of low in­ter­est rates to de-lever­age con­sid­er­ably,” Khan said at a client pre­sen­ta­tion in Joburg this week. “They are now in bet­ter shape to be able to con­trib­ute more strongly to growth. De­mand for durable goods has con­tin­ued to rise.”

The bank sees the rand strength­en­ing to 11.80/$1 by year-end, from around 12.76/$1 on Wed­nes­day, and the econ­omy ex­pand­ing by 2.2% in 2018.

“The rea­son we are a lit­tle more up­beat on South African growth than many of our peers is that when we look closely at the data, we see those green shoots of re­cov­ery,” Khan said.

While ris­ing US rates were caus­ing volatil­ity in emerg­ing mar­ket cur­ren­cies, Trea­sury yields re­mained in a long-term down­ward trend, she said. The rand hadn’t bro­ken out of its longer-term trad­ing range and was well-placed to re­gain its strength­en­ing tra­jec­tory.

South Africa’s cur­rency soared in the first quar­ter as Cyril Ramaphosa ma­noeu­vred to re­place Ja­cob Zuma as pres­i­dent, boost­ing busi­ness con­fi­dence af­ter four years of eco­nomic growth be­low 2%. But re­cent data showed an econ­omy still strug­gling to take off, with out­put con­tract­ing 2.2% in the first quar­ter of the year com­pared with the pre­vi­ous three months. – Bloomberg

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