South Africa gets a downgraded credit rating

Wealth

South Africa gets a downgraded credit rating

During the past week, Fitch Ratings decided to revise the South African economy’s outlook from stable to negative. 

During the past week, Fitch Ratings decided to revise the South African economy’s outlook from stable to negative. However, it affirmed SA’s rating at BB+. Fitch cited lower GDP growth and increased spending on state-owned entities as a reason for the rating. This came after the National Assembly accepted the special appropriation bill to give Eskom an additional R59bn financial boost over two years.

The US economy grew at an annual rate of 2.1% in the second quarter of 2019 – lower than the first quarter’s 3.1%, but better than economists’ expectations of 2%. Fitch’s announcement, combined with US growth data, put some pressure on the rand and the local currency traded weaker. The rand lost 2.57% in value to trade at around R14.29 to the USD.

It would seem that central banks globally agree that interest rates need to be cut to stimulate growth. The European Central Bank (ECB) indicated that it would cut its short-term interest rate in September and possibly revamp its quantitative easing programme. This major policy shift aims to stimulate the eurozone’s weakening economy, which is suffering from the ongoing weakness in global trade as a result of trade tension between the US and China.

Russia and Turkey cut interest rates over the past week amid a global shift toward a more accommodative monetary policy. The Bank of Russia cut its key rate to 7.25% from 7.5%, and Turkey’s central bank decreased its rate by 425 basis points down to 19.75%.

Boris Johnson won the race to become the UK’s new prime minister, while Theresa May officially handed her resignation to the Queen on Wednesday. Johnson has pledged to lead the UK out of the European Union by the 31 October deadline, with or without a deal, further intensifying political and economic uncertainties for the UK.

This week’s announcement by the Fed regarding US rates will be a critical economic event and will be watched by market participants globally. The announcement is expected on Wednesday.

 

Kind regards,

SECURITAS – Wealth Management


























Market data provided by I-Net | News article provided by Securitas with 4D Wealth


Fanie WassermanB. Com (Hons)(UJ), PDFP (UOVS), CFP®fanie@securitas.co.za
Johan SteynRFP®082 680 9510johan@securitas.co.za
Albert van der LindeB. Com (US), B. Com (Hons)(UP)076 087 3084albert@securitas.co.za
Hannes BreslerCFP®, B. Com (Hons)(UJ), Pr. Tech Eng082 823 7973hannes@securitas.co.za
Michelle Kleinhans082 850 3092michelle.kleinhans@securitas.co.za