Summary of macro-economic research views:

  • Inflation: Disinflation as a trend remains intact, although the bias to the downside is not as clear-cut as before. Nonetheless, inflation is set to remain between the 3-6% inflation target band and closer to the 4.5% mark.
  • Repo rate: The SARB kept the repo rate unchanged at 8.25% in July, likely ending its rate-hike cycle. Investors anticipate that the SARB will pause until mid-2024, after which rate-cut cuts are anticipated for Q3. This will depend on the ZAR’s performance, however.
  • Fiscal Policy: Fiscal dynamics remain concerning, with SA’s debt/GDP ratio forecast to rise towards the 75% mark. Risks have escalated, given the weak GDP growth outlook relative to National Treasury’s assumptions and the rapid deterioration of the government finance figures.
  • GDP Growth: GDP growth may have surprised to the topside in Q2, but there are strong headwinds in the form of high interest rates, load shedding and structural constraints that will weigh on any future performance. There remains a high chance of recessionary conditions in the next 2-3 quarters, especially if a global slowdown gathers momentum.
  • Currency: The greater the degree of fiscal distress, the higher the probability that the ZAR will struggle to make back lost ground. The current account is no longer in surplus, terms of trade are not what they were, bonds reflect a high degree of fiscal risk and portfolio flows are being undermined by poor financial market sentiment.
  • Bonds: Bond yields may be elevated and attractive, but they need to be, to compensate foreign investors for the risk they accept when building exposure towards SA assets. Bond yields will likely remain elevated in the lead up to the MTBPS thought to now being taking place on the 1st November.
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