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JOHANNEBSURG - The rand traded firmer as thawing risk sentiment played in its favour according to NKC Research.
Demand for emerging market FX in general, and commodity-linked currencies specifically, pushed the greenback weaker. While indications are that local measures to contain the Covid-19 pandemic have been effective in combating the spread of the virus, the economic implications will be severe. We expect a 7.2 percent GDP contraction this year followed by a 4.2 percent recovery in 2021.
The fiscal deficit is expected to widen to 14.6 percent of GDP this fiscal year while public debt is expected to rise to 82.2 percent of GDP by year-end before peaking at 90 percent of GDP over the medium term. At these levels, government finances are highly vulnerable to fluctuations in investor sentiment and fiscal consolidation will have to become a top priority in order to regain fiscal credibility. At the close of local trade, the rand quoted 0.63 percent stronger at R18.
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