The following were brief notes from the SARB Economic Roundtable discussion which took place on 18 August 2017 and is attended by economists, industry experts, research analysts and policymakers.
- On monetary policy, there seemed to be a broad consensus that we are in a loosening cycle, but with some risks attached. The rand remains the key risk to the outlook, along with bond yields that have thus far reflected much complacency among international investors.
- Any further downward revision to the SARB’s forecasts at the September or November 2017 meetings will probably necessitate a downward revision to Nedbank CIB’s repo forecast. We currently expect two to three rate cuts of 25bps each before 1H18. Hence we will be watching these assumptions closely for any changes.
- Concerns were raised over fiscal policy, given the upcoming MTBPS speech in October 2017, which the ratings agencies will keep a close eye on. We believe that fiscal consolidation has at best, taken a piece-meal approach in the last four years which has seen SA’s gross debt to GDP rise from 43.7% in 2013/14 to the projected 52.9% by 2018/19 and revenue under-collection of (a cumulative) R47 billion in the same period.
- Overall, a downgrade and exclusion from the Citi WGBI seems as though it is a foregone conclusion among participants. However, global conditions have changed enough that we may be cushioned from any blow from a downgrade in the near-term. In our opinion, the concern thereafter is the domestic problems which will start surfacing when liquidity starts to dry up as global monetary policy tightening accelerates.