Good news for the rand despite economic struggles

During the last quarter, reports about feuds between the president and the finance minister dominated then news. Not to mention the ongoing concerns that the country may be downgraded to junk status. Yet, amid this difficult quarter, the rand returned 11% for investors selling the dollar.

Nasdaq still breaking records

Following the Federal Reserve Bank’s decision to keep interest rates unchanged, the Nasdaq achieved its second straight record last week as US stocks posted strong gains and showed an improvement of 12.51% in the last 90 days. The Federal Reserve Bank also revised their expectations regarding interest rates and this reassured, and again attracted investors to evolving markets such as South Africa.

 

Do the accusations against Pravin Gordhan threaten to destroy our economy?

Credit rating agencies do not only look at political noise, but look at stability within in country. If South Africa is not downgraded to junk status and if the allegations against the finance minister are dropped, the rand could very well strengthen to R10 or R12 against the dollar. It is not all doom and gloom for South Africa and the focus for the government should remain on ensuring we have stability in our economic governance institutions in order to turn the current situation around and build an inclusive economy that benefits all South Africans.

 

The role of the Reserve Bank

The Reserve Bank has mostly kept its distance from the drama. However, by leaving interest rates unchanged, it has brought about some relief for consumers.

 

What credit rating agencies look at when making decisions about the country’s grading

Moody’s has always been very favourable towards South Africa and growth is the most important factor in their consideration. Moody’s expect a growth rate of at least 0.2%. The Reserve Bank’s expectation is that we will achieve around 0.4%, which is promising. They will also be looking at stability and progress on government and business efforts to boost economic expansion.

 

What does an unchanged repo rate mean for the price of housing?

Good news for home buyers and the property market in general as the repo rate remains unchanged. With the repo rate remaining at 7%, the base home loan rate will remain 10.5%. The outlook for the rest of 2016 is promising and the South African housing market continues to demonstrate maturity and ongoing resilience.