The rand has weakened ahead of Finance Minister Enoch Godongwana’s national Budget Speech at the Goodhope Chamber in parliament on Wednesday.
Speaking to Sunday World on Tuesday, Elna Moolman, head: SA macroeconomic, fixed income and currency research at Standard Bank, said: “Put differently, it [the rand] is discounting a large risk premium to reflect not only the general uncertainty about the state of the global economy and the impact that it will have on South Africa, but also specific events including the potential grey-listing by financial action task force and the uncertainty about the ultimate extent and impact of the power shortfall.”
Moolman said key fiscal will likely be worse than government’s medium-term budget policy speech (MTBPS) forecast in October 2022, which preceded a spike in loadshedding and did not factor in debt-relief measures for cash-strapped Eskom.
“The downside risks to the growth trajectory have increased since the MTBPS, but we still foresee more than 1% growth this year, and we expect National Treasury’s forecast to be similar,” she said.
Speaking about high-frequency data, Moolman said it has been resilient notwithstanding a plunge in available electricity.
“Despite headwinds from softer global growth and weaker commodity prices, we expect strong growth in private-sector electricity generation and storage capacity to make the economy more resilient to the surge in loadshedding,” she said, noting that she expects government’s debt-GDP (gross domestic product) ratio to peak in 2023.
“Minister Godongwana, unfortunately, needs to provide sizeable fiscal support for Eskom that hasn’t been factored into fiscal forecasts yet, while tax revenues should be under pressure from the surge in loadshedding.
“We expect the deficit to essentially remain unchanged in the next year from the current fiscal year, with a notable narrowing only from next year. We’re slowly moving in the right direction.”
Ester Ochse, product head for FNB integrated advice, said in light of the prevailing economic environment, it has become increasingly important for consumers to pay special attention to the national Budget Speech, as key decisions made by the minister will have an impact on people’s personal financial situations and potential wealth-creation strategies.
“It is a good time to keep an eye on your personal finances and budgeting strategy. The desire for financial freedom cannot be ignored. With continuous practice and with the necessary budgets in place, consumers can achieve this goal,” said Ochse.
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