How will the South African economy weather recent challenges?
Dukascopy TV recently produced a piece covering economic developments in South Africa as labor strikes and power outages, which have plagued the country over the last year, have had a significant negative impact on its economy. Low oil prices thus far in 2015 that should have positively affected the economy under normal circumstances were offset by the aforementioned power supply shortages, which have hurt manufacturing production. Business confidence is also down, hitting a three month low in the month of March. On top of it all, the recent xenophobic violence that was captured on camera and shared across the globe has not helped matters. Economist Dirina Mançellari spoke with Dukascopy to provide analysis on the situation.
The South African economy has proven to be resilient in the face of recent developments, posting much better than expected results of late. Retail sales in South Africa grew a better than expected 4.2% over the same month last year in February. This marked a considerable improvement over the 1.9% increase in sales growth in January.
When asked what this might mean for the South African rand, Dirina said that, “while the recent positive news regarding retail sales can help the currency in the short term, there needs to be improvements in other fundamental areas of the economy to see a strengthening of the currency in the long term.”
Poorer than expected trade figures from China were released in mid-April as declining exports and weak imports sent ripples through world markets, especially South Africa. “South Africa’s currency hit a nearly two-week low against the dollar on Monday this was right after China, which is a major trade partner of South Africa, released its weak trade figures,” Dirina said.
However, despite the decrease in value of the rand as a result of China’s poor showing, Dirina stated that FocusEconomics expected the currency to bounce back in the mid-term. “In the three-month horizon FocusEconomics Consensus Forecast expects the currency to gain some ground and trade a 11.93 against the U.S. dollar and this is an expectation that the economy will improve in the following quarter.”
Dirina asserted that this trend will more than likely continue in the long-term and end the year at a very ambitious 11.57 rand to the USD. However, she did warn that the currency’s future is still surrounded by uncertainty, as the country still has a lot to do regarding much maligned power deficiency issues and labor strikes.
“For 2015 our panel expects the currency to gain some ground and end the year at 11.57 rand to the dollar, however, we can say that the currency remains highly exposed to swings in risk sentiment mainly due to the country’s external imbalances and risk of more labor strikes and power supply shortages."
Check out the video below to see the full interview:
Author: Brian Dowd, Sales & Marketing Assistant
Date: May 6, 2015
TagsLatin America Exchange Rate Trade Company News G7 Precious Metals Commodities Euro Area UK Australia Iran European Union Emerging Markets Portugal MENA Italy Asia Major Economies Eastern Europe Commodities Inflation Brazil Industrial Metals Commodities Panelists USA Fed Turkey Argentina Economic Growth (GDP) IMF Ukraine oil prices Gold United States Germany Mexico Housing Market Spain Financial Sector Venezuela South Africa Tunisia China Sub-Saharan Africa Vietnam India Energy Commodities Banking Sector OPEC Brexit Consensus Forecast Oil Base Metals Commodities Infographic Russia Nordic Economies Agricultural Commodities Canada Investment Unemployment rate Japan Forex precious metals France World Bank Africa Colombia Greece
6 hours ago
1 day ago
1 day ago
1 day ago
1 day ago
- Predictions & Estimates from Economist Daniel Lacalle
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What economy will the new Dutch government inherit?
- 2017 & 2018 Economic Outlook for the Top Oil Producing Countries
- Which countries will have the highest and lowest inflation in 2017?
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit