Tough economic times lie ahead

Writer: Janet Hugo CFP Director – Sterling Private Clients.

Part of my work as a wealth manager for my clients is to spend a great deal of time reading and researching markets and economic environments. In one of the reports I have just finished reading, Stanlib notes that economic growth has weakened in South Africa. Well, it doesn’t take an economist to point that out when looking at all the businesses that have been forced to close in Hermanus. Times are tough out there for business and portfolios are reflecting that.

Stanlib comments that it is possible that although key economic variables (growth and inflation) would support a further interest rate reduction of 0.25%, the Reserve Bank has adopted a “wait-and-see” stance. It is concerned about the market’s reaction to Eskom’s restructuring, the medium-term budget policy statement (MTBPS) at the end of October, and the credit rating decision by Moody’s, which is currently scheduled for 1 November.

This would suggest that a rate cut is still possible at the November 2019 MPC meeting, under the assumption that the upcoming economic policy announcements do not have an adverse effect on the exchange rate and government bond yields. If that rate cut does come, use it wisely and continue to pay off any debt as quickly as possible.

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