Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit.
He warns that possible interest rate hikes in the US may see capital being pulled from emerging markets, increasing the currency volatility in these markets further.
He expects the anticipated weakening of the rand to have a wide-ranging impact, pushing up “food prices to vehicle prices”.
The oil price is also again gaining ground.
Du Toit expects inflation to average 5.5% this year, which means it will accelerate from February’s 3.9% to around 7% by the end of the year.
This rapid increase is expected to place pressure on wage negotiations.
Interest rates will 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 will 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 expects new-car prices to increase by between 8% and 9% in 2015.
He regards the recent wave of xenophobic attacks in South Africa to have had more of a political than an economic impact to date, but warns that this may 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.”