11 Jan 2018

Risk update: will the market optimism on the outcome of the ANC elections be sustained, and meaningfully feed through into the economy?

Annabel Bishop

Chief Economist

Figure 1: Economic Scenarios – base case or scenario 3

After late December/early January’s marked appreciation the rand, and SA’s other financial market indicators, have not seen the rally continue, but have not meaningfully lost ground either. Some vacillation has occurred on market rumours of an early Presidential step down from Jacob Zuma, but nothing has been formally communicated yet in this regard, and to date remain market rumours. The risk is seen to have receded slightly for South Africa’s outlook, specifically the risk to the downside is assessed to have lessened somewhat, as the extreme down case’s probability has dropped from 26% to 22% and the up case has risen from 8% to 10%, while the expected or base

Figure 2: Baseline or expected case exchange rate forecasts
Figure 3: Economic Scenarios – down case or scenario 4

line case now sees a probability of 34%, from previously 33%. The extreme up case maintains a probability of 1%. The slight changes in these probabilities (see figures 1, 3, 5, 7 and 9) are supported by the Cyril Ramaphosa win at the ANC elective conference, and so the fact that he is likely to become president of SA. In particular, his proposed policies (see “Macro-economic outlook 2018–2023: Global growth is expected to strengthen somewhat further; for SA’s growth free market policies are key”, 5th January 2018, website address below) have improved market confidence,

Figure 4: Down case exchange rate forecasts
Figure 5: Economic Scenarios – extreme down case or scenario 5

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