A Reuters poll out Wednesday, shows the rand losing half of its 2019 gains over the next 12 months as a result of soft growth.
The local unit has gained 7% against the greenback in 2019, thanks mainly to external factors including buoyed sentiment around trade negotiations between the US and China, and the Federal Reserve’s wait-and-see approach to raising interest rates.
Over the next 12 months, however, the rand is expected to soften 3% to R13.85 per dollar, although that median forecast is 58 cents stronger than last month’s poll, Reuters said.
“There are still notable local risks aligned to subdued growth and fiscal challenges that warrant caution,” said Christopher Shiells, emerging markets analyst at Informa Global Markets.
Shiells said that the national elections due in May also carry “popular policy moves and reform paralysis”.
The rand was the fifth worst performing currency against the dollar in 2018 – 13.8% weaker. However, the rand’s strong start to 2019 has been helped locally, by optimism around Ramaphosa’s reforms.
The most bullish forecaster in Reuter’s poll has the rand at R12.63 per dollar in a year while the most bearish suggested the currency could weaken to R15.50.
The rand traded at the following levels against the major currencies on Wednesday:
- Dollar/Rand: R13.43 (0.38%)
- Pound/Rand: R17.38 (0.36%)
- Euro/Rand: R15.29 (0.25%)
Reuters said that South Africa’s interest rates could be hiked by 25 basis points to 7% percent in May, after the Reserve Bank left them unchanged last month.
The World Bank projects that South Africa’s economy will grow to 1.3% in 2019, down from its June 2018 estimate of 1.8%.
President Cyril Ramaphosa will deliver the State of the Nation Address (SoNA) during a joint sitting of the two Houses of Parliament (National Assembly and National Council of Provinces) on Thursday, 7 February 2019 at 19h00.
He will present a plan to address South Africa’s needs for the year ahead. The theme for this year’s event is: “Following up on our commitments: Making Your Future Work Better”.