Market Overview

Looking ahead to a rocky medium-term

In South Africa, these key themes will dominate in the medium-term:

  • Gradual economic recovery will be constrained by political uncertainty and credit rating downgrades
  • The domestic political ‘noise’ is set to continue
  • A sharp fall in business confidence will hit already weak fixed investment
  • Projected weak growth in credit extension, particularly to households
  • Agriculture sector set to rebound after drought
  • Inflation risks are dissipating but there is no rate relief on the horizon
  • Ongoing fiscal consolidation will stunt consumption, and more taxes will follow

Importantly, the rand is volatile, but with a depreciating bias…

Potential negatives:

  • Credit rating downgrades and capital outflow risk
  • Political upheavals

Potential positives:

  • Rand is undervalued
  • Reduction in current account deficit
  • Inflation pressures are dissipating

The Global outlook:

Heightened global policy uncertainty adds volatility (click on the graph to enlarge)

Source:  Ashburton Investments