MONDAY, 11.00AM:
The health of South Africa’s trade balance and the depth of its foreign reserves are likely to be affected by falls in Asian markets. In addition, the collapse of Asian currencies and equities markets could reduce foreign capital inflows into South Africa, as foreign investors reassess the risk posed by emerging markets.
South Africa’s exports to Asia, including chemicals, steel, coal and diamonds, could be rendered less competitive in the face of the depreciation of the Australian dollar, in response to the collapse in Southeast Asian currencies. Australia is a direct competitor to South Africa in numerous exports, particularly raw materials.
One economist says that the effect on the current account of the balance of payments could be as high as R1-billion a year. But on the positive side, South African imports from Southeast Asia, including computer equipment and other electronic goods, will become much cheaper, balancing the effect that increased imports will have on SA inflation.
The threat to South African forex reserves in the wake of the turmoil in Asia’s markets could, however, delay the next Reserve Bank interest rate cut.