It is no secrete that South Africa is one of the leading counties when it comes to economic inequality. The recent pandemic has also not been very kind to the struggling economy, so it is no surprise that the IMF(International Monetary Fund) reports concerns over the country's economic future going forward. Why is South Africa in this state？ How will South Africa avoid this doomed future？ Well we got no crystal ball but we can help you gain an understanding of the main proponents causing this and what this will mean for the Rand.
Be as it may that the country recently faced the economic backlash from the pandemic restrictions, this quarter the country report the same economic levels as before the pandemic. This recovery was quicker than expected, which may be a sign of a strong economy getting back on its feet but this is not the full story of course.
As recognized by the IMF, this recovery has been somewhat been uneven throughout the country. They went on to say “The flooding in Durban, uncertainty about the war in Ukraine, tightening of global financial conditions, and Chinas slowdown pose challenges to growth and price stability”
The recent global events such as the uncertainty caused by the Ukraine and Russia war, as well as the rising oil prices have left a lot be desired in the South African economy. These issues tend to have a domino effect throughout the country as with rising fuel prices, so does the cost of transporting goods rise. The higher that cost is the higher cost of goods and services will eventually be.
Another set back which really affected the country were the recent floods in Durban. The country is also quite depended on the ports to ship goods to and from the country the recent flood halted this billion dollar industry, certainly putting a dent into the economy of the country as the port were out of service at the times of the flood. One can only imagine the chain supply issues that built of this delay, affecting further business inland.
As the ordinary are paycheck will not rise to reflect this change, and finding employment in such conditions will be even harder, this will result in the rand eventually losing some of its spending power.
The National Treasury of South came out with statement confirming the concerns of the IMF, stating that their current strategies are aimed right at the heart of these issues. They acknowledge the countrys plight and have plans rectify this issue. They said “The government recognizes the need to address deep-rooted socio-economic challenges, including unemployment, inequality and poverty, while stabilizing government debt,” .
Not much was said as to what exactly their plan is to deal with these issues but one can be confident that there is something in the pipe lines
So what does this mean for traders？ We should be looking to go short on the currency in the next few months. You going to need a great regulated broker so that you can fully take advantage of the opportunity and for that you should visit WikiFX. Its an app that allows you to compare brokers against each other and find the best brokers for you. Its easy to download and its a tool that will be of aid even later on into the future.
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