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Standard Bank Group
The SA Daily 05 August 2020

Conditions ever tighter

  • GDP recovering back to even 2019 levels will be protracted, with an economy facing tight financial conditions, abrupt job and income losses, and individuals and SMMEs with no cashflow. In addition, demand and production capacity have shrunk, and reliable and affordable power supply remains out of reach, as do growth reforms.
  • The risks remain both high rand and JSE All Share Index volatility. Also, credit default swap (CDS) spread levels are high due to rising concerns about SA’s economic growth and fiscus. The rand is at R17,31/$, above its average of R16,77/$ in July, while CDS is at 320 bps.
  • The year-on-year growth rate of credit extension has slowed even as credit extension has continued during the prevailing crisis, with credit conditions therefore moderating somewhat.
  • Financial conditions, though, per our inhouse Standard Bank Financial Conditions Index, are far below normal despite improving somewhat from the sharp deterioration in April. Nevertheless, the SARB’s easing of 300 bps since January should support financial conditions over the coming months.

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