Investing.com’s stocks of the week
The economic scenario likely remained challenging in Q3, after the historic plunge in activity in Q2. While the pace of decline moderated from Q2 due to the gradual easing of restrictions, industrial output contracted relatively sharply in the quarter.
Meanwhile, business sentiment remained entrenched in negative territory in the same period, likely holding back capital spending. Turning to Q4, however, the manufacturing PMI returned to growth for the first time in 18 months, hitting an over two-and-a-half-year high amid improved demand dynamics. Moreover, despite a stubbornly high number of Covid-19 cases, authorities announced the reopening of borders to all international travellers on 11 November, in a bid to revive the ailing tourism industry. In other news, on 28 October, the government tabled its medium-term budget statement, reaffirming its commitment to fiscal consolidation and debt stabilization.
After this year’s projected contraction at the hands of Covid-19, the economy is seen rebounding in 2021 as domestic and foreign demand revive. That said, high unemployment and persistent electricity shortages are likely to weigh on growth, while frail fiscal metrics and a ballooning public debt stock pose additional risks. FocusEconomics panellists see the economy expanding by 3.6% in 2021, which is down 0.1 percentage points from last month’s forecast, and 2.5% in 2022.
Inflation ticked down to 3.0% in September from August’s 3.1%, and thus landed on the lower bound of the Central Bank’s 3.0%–6.0% target range. After a slowdown in inflation this year due to low global oil prices and weak domestic demand, price pressures are seen picking up in 2021 as activity recovers. Our panel sees inflation averaging 4.0% in 2021, which is unchanged from last month’s forecast, and 4.4% in 2022.
At its most recent meeting on 17 September, the South African Reserve Bank (SARB) left the repo rate unaltered at its historic low of 3.50% amid a subdued economic backdrop and contained inflationary pressures. The large majority of our panellists expect the Bank’s stance to remain broadly on hold ahead and do not see tightening until sometime in H2 2021. FocusEconomics panellists see the SARB repo rate ending 2021 at 3.60% and 2022 at 4.16%.
The rand strengthened notably against the USD in recent weeks, largely reflecting positive PMI data and the U.S. election result. On 13 November, the ZAR traded at 15.60 per USD, a 6.0% month-on-month appreciation. Despite the recent gains, the currency is projected to weaken ahead amid a still-muted economic backdrop. Our panel sees the ZAR ending 2021 at 16.83 per USD and 2022 at 16.64 per USD.
