Photo by: Bloomberg
Banking group Absa’s forecast was for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, said Absa sectoral analyst Jacques du Toit on Tuesday.
Speaking at a Ford Motor Company breakfast in Pretoria, he warned that possible interest rate hikes in the US could see capital being pulled from emerging markets, increasing the currency volatility in these markets further.
He expected the anticipated weakening of the rand to have a wide-ranging impact, pushing up “food prices to vehicle prices”.
The oil price was also again gaining ground.
Du Toit expected inflation to average 5.5% in 2015, meaning it would accelerate from February’s 3.9% to around 7% by the end of the year.
This rapid increase was expected to place pressure on wage negotiations.
Interest rates would probably see an increase of 25 basis points by the end of the year, said Du Toit.
“Next year the forecast was for another three 25 basis-point increases.”
New vehicle price increases would add to the poor outlook for consumers, with new vehicle price inflation recorded at 7.6% at the end of the first quarter of the year.
Du Toit expected new car prices to increase by between 8% and 9% in 2015.
He regarded the recent wave of xenophobic attacks in South Africa to have had more of a political than economic impact to date, but warned that this might change should violence flare up again, especially in terms of the country’s exports into Africa.
“It is difficult to quantify the impact of the attacks, but most certainly it is not good for the image of the country. It is sad that this is happening considering the challenges we already face as a country.”