JOHANNESBURG - The rand slipped as markets digested the supplementary budget while dollar strength weighed according to NKC Research.
In the supplementary budget presented on Wednesday, Treasury presented a sombre outlook as the fiscal projection was revised to the highest post-apartheid deficit on record of 15.7 percent of GDP, against an initial shortfall target of 6.8 percent of GDP for 2020/21 as delivered in February.
Under the assumption that the economy will contract by 7.2 percent – against our own expectations of a contraction of 9.1 percent – this year, Treasury expects gross government debt to balloon to 81.8 percent of GDP in the current fiscal year, up from 65.6 percent of GDP in the previous budget. In turn, power parastatal Eskom urged the public on Wednesday to “continue reducing electricity usage” as breakdowns at an additional two generation units contributed to a strained system, underlining the reality that reopening of the economy will be accompanied by the concomitant worsening of the country’s power shortage woes.
At the close of local trade, the rand quoted 0.59 percent lower at R17.30/$, after trading in range of R17.18/$ - R17.41/$. Expected range today R17.30/$ - R17.60/$.
South African bourse
The JSE All Share (-1.85 percent) ended weaker yesterday, dragged by losses across the board. In the overall emerging market sphere, the MSCI Emerging Market Index (-0.38 percent) traded on the back foot as risk sentiment dipped.
Brent crude oil
The Brent oil price slumped late in the day on fresh new coronavirus concerns and rising inventories. US government data showed crude stockpiles rose by 1.4 million barrels last week. At the close of local trade, benchmark Brent crude futures quoted 4.37 percent weaker at $40.66pb. Crude prices extended losses during Asian trade this morning.