The rand should be less volatile this year, international credit ratings agency Standard & Poor’s (S&P) managing director for Europe, Middle East and Africa sovereign ratings, Konrad Reuss, told I-Net Bridge late on Monday.
“In 2001 the rand was the worst performing currency amongst emerging markets, only to become the best performing currency last year. This highlights the rand’s tendency to overshoot on both the downside and upside. This year we expect the rand to be less volatile,” Reuss said.
The rand moved from a best level of R6,0450 per dollar in the first quarter 2000 to a worst level of R13,86 per dollar in the fourth quarter 2001. It has since recovered to a best level of R8,34 per dollar on January 6 2003.
The rand is normally volatile in an even year (1996, 1998, 2000 with the 2002 weakness brought forward to the fourth quarter 2001 because of “9/11”) and then recovers to be fairly stable with the range in 1999 a fairly narrow 30 cents against the US dollar.
On November 12, 2002 S&P changed South Africa’s outlook to positive, but Reuss said an actual ratings change should not be expected until after the February 26 Budget and the Telkom initial public offering (IPO).
“We have some significant events in the first quarter such as the Budget and the Telkom IPO that will have an impact on any ratings action. In addition we would like to see some more progress on raising South Africa’s economic growth so that the social issues are addressed more fully,” Reuss said.
The government has scheduled a Growth and Development Summit for May 11 to 13 to address micro-economic reforms that continue to constrain South Africa’s economic growth to the 3% level, rather than the 5% level that is needed to address the apartheid legacy.
Many business people believe that Statistics South Africa under-reports economic growth, as retailers report nominal sales growth in excess of 20% y/y, while Statistics South Africa says that nominal gross domestic product grew by less than 12% y/y in the first three quarters of last year.
In the third quarter 2002, manufacturing production had soared by 8,4% y/y after rising by 8,0% y/y in the second quarter.
Manufacturing production for the first ten months of 2002 reflected an increase of 6,2% compared with the first ten months of 2001. – I-Net Bridge