USD/ZAR: Rand remains vulnerable to sentiment - BBH
|The Rand is expected to remain vulnerable while economic growth in South Africa is likely to accelerate during 2018 according to analysts at Brown Brother Harriman.
Key Quotes:
“The improving South African economy will be hampered in 2018. Its GDP rose 1.5% y/y in Q4 2017, and is expected to accelerate at around 2.0% y/y in Q1 2018. But capital investment remains weak despite improved business sentiment following the change in South Africa’s president from Zuma to Ramaphosa.”
“South African inflation continues to ease as core CPI slowed to 4.1% y/y, which is the lowest level since December 2011. SARB remains vigilant and sees CPI rising 4.9% in 2018 and 5.4% in 2019. A strong rand and limited increase in the electricity tariff would stem inflation, while high oil prices and hiking VAT and the sugar tax would boost inflation pressures. The survey by the South African government indicates its inflation expectations in 2018 marginally declined to 5.7% from 5.8% in 2017, remaining close to the upper end of the target range.”
“The rand is expected to remain vulnerable to the prospect of a credit rating downgrade and possible risk-off sentiments generated by political developments.”
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