Jacques Nel, head of macro-economic research for Africa at NKC African Economics. Picture: SUPPLIED
Jacques Nel, head of macro-economic research for Africa at NKC African Economics. Picture: SUPPLIED

In this edition of Business Day Spotlight, we look at this week’s top economics news, focusing on new inflation figures, interest rates, and a recent downgrade by international ratings agencies. 

Our host Mudiwa Gavaza is joined by Jacques Nel, head of macro-economic research for Africa at NKC African Economics, to chat about the issues. 

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A split decision of the Reserve Bank’s monetary policy committee (MPC) this week left the benchmark interest rate unchanged. Nel said the split decision demonstrates the difficulty the MPC faces in trying to balance competing economic interests to get the country back on a growth path. 

The Bank’s internal modelling tool — the quarterly projection model — suggests two rate hikes in the second half of 2020, but Nel expects interest rates to remain steady throughout 2021. 

Business Day Spotlight host Mudiwa Gavaza. Picture: DOROTHY KGOSI.
Business Day Spotlight host Mudiwa Gavaza. Picture: DOROTHY KGOSI.

The discussion then turns to ratings and inflation. 

SA recently received a double dose of ratings downgrades from both Moody’s Investors Service and Fitch Ratings. Both agencies maintained their negative outlook, with Moody’s now placing SA at two notches into junk, and Fitch moving SA three notches below investment grade. S&P Global was the only major ratings agency to give SA some reprieve choosing to maintain both its rating and outlook.

Nel said, though, since Moody’s downgrade in March, much talked about at the time as it was SA’s only remaining investment grade, subsequent decisions should not be ignored. They mean the country has more fighting to do to claw back its investment grade ratings, he said.

He also notes that Moody’s seems to have shifted its sentiment about SA. The agency had, for a long time, given the local economy the benefit of the doubt, choosing to remain positive where the other two agencies had taken a pessimistic stance.

Nel also talks about recent consumer inflation figures released earlier this week by Stats SA, a reflection of how the economy has performed in 2020 and the health of other African economies. 

For more episodes, click here.

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 Business Day Spotlight is a MultimediaLIVE production.

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