This, they say, will be influenced, amongst others, by the fact that the currency’s strength acquired in 2002 of more than 30 percent will be stable in the first quarter of the year.
Also, a decline in the interest rate and inflow of foreign capital should be expected.
In line with expectation, the currency began the New Year on a high note, surpassing the R8.50 level to the US Dollar – the highest level in 16-months.
It traded at around R12.50 during this time last year.
Money Market Service International economist, Michael Keenan, says he believes the currency will sustain its gains mainly because of a variety of elements including firm gold and platinum prices.
South Africa is a big exporter of the two money-spinning precious metals.
‘Things will really get going early enough, the Telkom IPO will generate around R12- billion for the economy and the ICC Cricket World Cup will positively impact on the critical tourism aspect of the economy,’ says Mr Keenan.
The fact that Toyota South Africa will try to emulate BMW’s export success story this year is also good news for the economy, he said.
Asked to comment on the performance of the world’s best performing currency against the US Dollar in 2002, he replied: ‘It will be between R8.50 and R9.20 for the better part of the first quarter.'
Standard Bank senior economist, Johan Botha, says he expects a fairly stable currency in the medium to short term.
‘Of course this should lead to an inflation decrease and ultimately a drop in the interest rates, especially the money market.’
On the economy, Dr Botha pointed out that although the global economy was uncertain, South Africa was still in a good position to achieve a 3.5 percent growth rate due to fixed investments, stable exchange rates and capital inflows.
On the food price hike that hit South African consumers last year, owing to the Rand’s sharp depreciation, he said retailers would not further increase prices.
‘However, it is unlikely that there will be price reductions,’ Dr Botha said.
He agreed that the hosting of the ICC Cricket World Cup from 08 February to 23 March would impact positively on the high riding country’s tourism sector.
On the petrol price, which recently experienced two consecutive decreases - in December by 16 cents and on Wednesday (01 January) by 18 cents - he said motorists would be pleased to know it would remain unchanged.
He added that the department of minerals and energy’s equalization fund would assist in case of any rise, saying if it occurred, a rise would only be marginal.
Dr Botha says a stable exchange rate means there will be change in the global oil price and as a result of that the petrol price will remain at its level.
However, both economists have warned that should the US invade the oil producing Iraq, such a war would impact negatively on the country’s economy and the international community.
The Rand is currently trading at R8.46 against the US Dollar, R13.56 against the Pound and R8.82 against the Euro – BuaNews.
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