The current global and South African macroeconomic environment

Many experts predict the true impact of the Covid-19 pandemic will only be felt in the years to come. However, there’s no denying the spread of the infection and the strict measures taken by governments, have already taken a significant toll on the global economy.

In our recent webinar about the current global and SA macroeconomic environment, the Nedbank CIB team provided expertise about the situation we find ourselves in and what’s expected to come.

Offering global insights, Senior Macro Strategy Analyst for Markets, Neels Heyneke, discussed why inflation is an unlikely scenario as we already have the lowest interest rates in history. There is a battle against deflation that will be dependent on central banks working together and putting aside geopolitics. The cost of debt must remain below the return on capital, which is essential for both the economy and asset performance. This will assist in keeping a potential – but likely – global depression at bay.

Research Analyst for Markets, Reezwana Sumad, delved into Covid-19 and its impact on SA in particular. The lockdown is likely to cost the economy an additional 5,2% in growth, with it set to contract by 7% in 2020. Even though the country may emerge out of this recessionary environment in 2021 and 2022 with modest recoveries, it’ll likely lead to a scenario where large businesses dominate supply chains due to smaller businesses failing. In terms of employment, this isn’t good news since a majority of South Africans are employed by smaller companies.

Head of Research for Markets, Avinash Kalkapersad, tackled equities and what the markets have revealed. The three big takeaways were the following: one, the JSE All Share is cheapish, since SA is cheaper in relation to other emerging market peers. Two, larger companies are performing much better in this environment – both from operational and share price perspectives, which was already a trend before Covid-19 but has now accelerated. And finally, Covid-19 had less of an impact on defensives than initially expected.

Our team is ready to assist you in traversing uncharted waters during this difficult time.

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By | 2020-06-22T13:37:55+02:00 June 22nd, 2020|Markets and Research|0 Comments

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