Weak Q3 trade data keeps pressure on rand and fuels inflation fears
Expect further pressure on the rand next year. This was the forecast from economists on Friday after the Reserve Bank revealed a greater than expected widening of the current-account deficit in the third quarter. Political uncertainty and economic factors abroad and at home, and the prospect of a sovereign credit rating downgrade this year, have been major drivers of the rand's volatility. "The wide deficit is a key reason we expect that the rand will remain under pressure in 2017," said John Ashbourne, Africa economist at Capital Economics in London. Pressure on the rand may stoke inflation - now at 6.4% - and lead to a rise in interest rates. In recent months South Africa's weak economic growth has led the Reserve Bank to adopt a cautious stance and it has held back on hiking rates. However, economists expect a hike of 25 basis points in the first half of next year, a decline in inflation from midyear, and as a result a possible cut in interest rates towards the end of the year.
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