The prospect for increased economic growth during the next two quarters is a no brainer, writes Adri Senekal de Wet.
Market sentiment is rapidly changing. An elevator discussion with a senior economist at the SA Reserve Bank on Thursday supports this statement.
I asked: What if Moody’s keeps the debt grading on a Baa1 level with a negative outlook? The respected economist answered as if he was prepared for the question:
The exchange rate will improve steadily;
Import prices, especially for food and fuel will either decrease or increase by less than the current inflation rate. This will contribute to the inflation rate to decrease in the new year alleviating the pressure on the MPC to increase interest rates further;
Bond rates will decrease, that in itself will imposes less strain on the financing of government debt and on the coming budget in February 2016;
The prospect for increased economic growth during the next two quarters is a no brainer, allowing the Minister of Finance to concentrate on the 2017/2018 budget and focus on growth and job creation;
Financial, industrial and property share prices will increase steadily as higher earnings prospects will drive these share prices;
The economy is more likely to maintain the promising employment creation level of more than 280 000 new jobs during the next few quarters. If these levels can be maintained then changes are good that more than 1 million new jobs over the year ending the third quarter 2017 can be created. This will contribute to the unemployment rate to decline steadily over the next year.
This is for Moody’s. If S&P Global Ratings also keeps its rating on its current level of BB- the above scenario will remain.
* Adri Senekal de Wet is an Executive Editor at Independent Media
Independent Media