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Rand remains weaker after SA slips into recession

The rand was softer on Wednesday morning on the shock news that SA’s economy was officially in recession.

Nedbank analysts said on Wednesday the disappointment in the markets was “palpable” and raised concern of further ratings downgrades.

Statistics SA data showed the economy contracted 0.7% in the first quarter‚ following the 0.3% decline in the fourth quarter of 2016.

So we're in a recession. What does it all mean?

Consensus among economists had been for growth of 0.9% and the bad news further dented investor and consumer confidence levels.

Later in the day the South African Chamber of Commerce and Industry (Sacci) will release its business confidence index for May.

Confidence levels will now be closely watched as the Reserve Bank mulls its monetary policy stance and ratings agencies consider whether the government will keep to its promises of fiscal consolidation.

Before the release of the GDP data‚ rating agency Moody’s was already widely expected to cut SA’s local and foreign-currency ratings by one notch to the last rung of investment grade‚ with a negative outlook. Its decision is likely to be announced after market close on Friday.

“The sharply negative GDP print will catalyse further credit ratings downgrades‚ probably sooner than we had previously anticipated‚” Nedbank analysts said.

At 9.01am the rand was at R12.8552 to the dollar from Tuesday’s R12.822‚ at R14.4894 to the euro from R14.4615 and at R16.59 to the pound from R16.5489.

The euro was at $1.1271 from $1.1278.

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