Wiseman Khuzwayo
THE RAND was under pressure against the dollar yesterday as investors’ risk appetite remained tentative across the globe despite a rescue deal for debt-ridden Greece.
It was bid at R11.6486 against the US dollar at 5pm. Earlier it weakened as much as R11.74.
John Cairn, a currency strategist at Rand Merchant Bank, said the “deal” between Greece and the euro zone at the weekend was in name only. “It rolls over the existing bailout for four months on terms that still have to be agreed (on). At best, it kicks the can four months down the road; at worst, there is no deal at all. The hard part needs to be agreed this week.”
Traders and analysts predicted a potentially volatile week for the rand with the release of gross domestic product (GDP) today, as well as Finance Minister Nhlanhla Nene’s maiden Budget speech tomorrow.
Fourth quarter GDP growth is expected to have accelerated to an annual 1.6 percent from 1.4 percent in the third quarter.
FNB economist Alex Smith said this would probably be driven by a rebound in manufacturing production, as well by decent growth from the services sector.
Laura Campbell, an economist at Econometrix, said Nene emphasised in his mini budget in October how the underperformance of economic growth compared with earlier expectations had resulted in revenue projections having to be downscaled significantly.
She said the medium-term budget policy statement forecasts for revenue in 2014/15 had to be revised down by R10 billion, R19bn in 2015/16 and by R31.8bn in 2016/17.
This compelled the National Treasury to suggest that it needed to find R44bn in tax increases over the next three fiscal years to sustain its programme of reducing the budget deficit from 4.1 percent of GDP to 2.5 percent by 2017/18.
“This reduction programme was essential to appease ratings agencies and persuade them that the government was intent on limiting the increase in the public debt to GDP ratio to no more than 46 percent by 2017/18.”