The level of volatility of the rand has been contained substantially, Standard Bank group economist Iraj Abedian said on Tuesday.
This could be attributed to, among other things, positive statements about South Africa’s credit outlook by international credit rating agencies and the International Monetary Fund and an improvement in the country’s terms of trade, he said at an economic briefing in Johannesburg.
Abedian said, however, there were some pockets of volatility in the currency and these were not influenced by regional or internal matters but by international issues.
”The hope is that, as the economy and financial regime normalise, and are perceived to be so by market players, this volatility will remain contained.”
Abedian said the Global Growth Competitiveness Index report has revealed that South Africa’s competitiveness was rising rapidly.
In this regard, South Africa was listed 44 out of 53 countries in 1997, and improved last year to 32 out of 81 contestants. Egypt and Zimbabwe were the other Africa countries that took part in the survey in 1997 and they scored 28 and 51 respectively.
In 2002, however, Egypt came last in the survey and Zimbabwe was in the 79th position.
Abedian said the interaction between interest and exchange rates would have implications for the nature and composition of South Africa’s economic growth in the remaining quarters of the year.
If the exchange rates moved strongly downwards in response to cuts in interest rates, it was likely that a sizeable portion of growth would be generated by exports.
A relatively weaker rand would make imports more expensive, raising the spectre of renewed bouts of inflation. – Sapa