We’re already seeing the market start positioning for a potential downgrade with USD/ZAR breaking above 10.70 and GBP/ZAR moving above the key 18.00 level. Some expats having to pay off loans in SA might like this, both think of the poor people back home for a change. They will suffer.
A ratings downgrade may see USD/ZAR drive towards 11.00 and most likely see the next move weaker within the long term trend on the ZAR. This week’s announcement affects the entire country and the overall economic picture in SA is turning very very bad. It’s not pretty and it’s quite simple. There is simply no good story to tell. Nothing.
The World Bank’s latest Global Economic Prospects (GEP), released a day after government’s intervention to end the protracted platinum industry strike stalled, forecasts that South Africa would grow by only 2% this year, 3% next year and 3.5% in 2016, reports Terence Creamer on Engineeringnews.co.za. This revision was made amid a larger warning that developing countries were headed for a year of disappointing growth of 4.8%, down from its January estimate of 5.3%.
The forecast for SA’s economic growth is a sharp pullback from the 2.7% outlook published in June last year and even the 2.3% predicted in April. As we reported earlier this week, there are even some analysts who is op the opinion that SA is already in a recession.
The International Monetary Fund in its April World Economic Outlook said SA could grow by 2.3% but we are not even close and the platinum industry strike is continuing to bite.
Despite what government officials are saying (yes, most are painting rosy pictures), is there anything good to say about our financial future in SA?