Despite all the current challenges being faced both globally and locally, continuous improvements are expected on more positive developments on Covid-19 vaccinations, according to Nedbank. According to the bank, this optimism is set to improve investor sentiment and drive financial assets into emerging markets with relatively higher yields, given that major countries are not expected to tighten policies any time soon. SA is set to be one of the beneficiaries from this, which will provide support for the rand and place the Reserve Bank in a more suitable position to accumulate reserves. Gold reserves will continue to reap benefits from the safe-haven status that precious metals have.
SA’s poor sovereign risk ratings may partly lead to the undermining of the pace of financial flows. The level of reserves’ import cover may also be reduced by a higher import bill, which could subsequently be pushed up by the revival of local demand of capital and durable goods.
Further rand appreciation is set to be supported by global forces, with interest rates in advanced countries hitting rock bottom. Due to aggressive quantitative easing, ample global liquidity is expected and risk appetites are likely to be driven higher due to a recovering world economy.
According to HIS Markit, there are also these economic predictions subject to change depending on local and global developments.
- Investors and policymakers will likely shift their focus from Covid-19 to the environment.
- Monetary policies will remain accommodative.
- Banking risks will rise despite the global financial sector avoiding major crises, especially in advanced economies.
- The prices on finished goods will increase.
- The US dollar is expected to weaken, which will strengthen more emerging currencies.