What a win for the Boks! In our previous review, we highlighted that 12 could be the magic number for SA in the 2019 Rugby World Cup. And so it was, with South Africa scoring two tries in the final, bucking the trend of no tries. The country is still feeling jubilant, with many hoping this could be just the thing to boost confidence, and retail sales (especially of Faf-like South African flag speedos).
However, we learnt from the October Medium Term Budget Policy Statement (MTBPS) that 12 might not be so magical after all. The headlines were alarming: without a plan, the budget deficit will stay wide of 6% of GDP and the debt ratio will breach 80% within the next decade. Note that the last time South Africa had a budget surplus was 12 years ago.
Moody’s and the rates market reacted negatively to the fiscal news. Moody’ s changed the outlook on the sovereign credit rating from stable to negative and the FRA curve priced out any hope for monetary policy easing. Yet, global central banks continue to loosen policy – the ECB has resumed QE and the Fed is injecting liquidity.
Will this give the SARB a window of opportunity to make December a little merrier with some monetary policy easing at their meeting next week?
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