The latest GDP numbers show that the South African economy is officially in a recession. In this video, Madalet Sessions provides a brief overview of the local market outlook.
Read the transcript of this video below.
Since the downgrade last quarter, what has happened in South Africa?
The South African economy has had a very weak response to the macroeconomic uncertainty unleashed by the downgrades and Zuma’s firings of the cabinet. Stats SA released the second quarter GDP numbers, which show that the economy is in fact in recession, with a second quarter of declining output and incomes in the South African economy. Unfortunately, this uncertainty is being reinforced by other policy initiatives within the ANC, with the recent release of the Mining Charter by the Minister of Mineral Resources, Mosebenzi Zwane. This charter fundamentally undermines the incentive to grow and invest in South Africa’s mining sector.
What does this mean for South Africans?
South African markets have revised expectations for monetary policy, i.e. interest rates set by the South African Reserve Bank. The markets now expect interest rates to remain more or less between 7.0% and 7.5% for the next two years. Unfortunately, the reason for the lower interest rate expectations is mostly because the market expects income growth within the South African economy to remain very weak.
So, do you think now is a good time to invest offshore?
As I write in our latest quarterly newsletter, I think it is always a good time to invest offshore. It helps diversify portfolios, which fundamentally increases the likelihood of meeting your investment objectives over the long run.
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