SA not a write-off just yet, says bank
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