Risk Update: revisions to global growth and monetary policy ......Risk Update: revisions to global...

1 Annabel Bishop • Investec Bank Limited • Tel (2711) 286 7188 • email: [email protected] •

https://www.investec.com/en_za/focus/economy.html

Risk Update: revisions to global growth and monetary policy expectations due to Covid-19, along with domestic factors, will impact SA’s risk outlook Thursday 5 March 2020

Figure 1: What will be the impact of coronavirus on global and Chinese GDP growth in 2020 in %

Source: Focus Economics Consensus Forecast panellists total responses

South Africa has seen risks increase from the global and domestic perspective, with globally Covid-19 (the Novel Coronavirus 2019), now expected to have a much greater impact on global economic growth than previously thought (see figure 1). The IMF stated this week that “it would be cutting its economic growth forecast for this year due to the disease”, adding “that global growth would dip below last year's rate of 2.9%” while warning that more "adverse" scenarios about global spread of the epidemic were starting to materialize.” South Africa reported its first Covid-19 case today, while globally the number of cases has elevated above 95 000 and above 3 000 fatalities. Focus economics shows that in a “poll of 84 analysts, roughly 70% see a reduction in global growth this year of at least 0.4 percentage points, with close to half of panelists projecting the virus to drag on growth by 0.4–0.5 percentage points”. “Analysts also expect greater damage to the Chinese economy” than previously, but there “is still a notable divergence in panelists’ views, reflecting the inherent difficulties in

Figure 2: Will coronavirus impact the global economy beyond 2020? and regions most affected

Source: Focus Economics Consensus Forecast panellists total responses

1.2%

30.1%

45.9%

13.3%9.6%

0%

10%

20%

30%

40%

50%

0.0-0.1pp 0.2-0.3pp 0.4-0.5pp 0.6-0.7pp 0.7pp

Impact on Global GDP

Yes, 24.0%

No, 76.0%

Impact on Global GDP beyond 2020

0 20 40 60

Other

Sub-Saharan Africa

South America

Middle East and North Africa

North America (incl. Mexico)

EasternEurope and Central…

European Union

No of times mentioned by panelists

Regions most affected, outside Asia

1.2%

26.2%

21.4%

34.5%

16.7%

0%

10%

20%

30%

40%

0.1-0.3pp 0.4-0.6pp 0.7-0.9pp 1.0-1.2pp >12pp

Impact on Chinese GDP




Figure 3: Daily % Change in COVID 19 – new cases outside China and growth rate of new cases

Source: World Health Organisation

forecasting the duration and extent of the epidemic.” The panellists responses were made after “the accelerating spread of the virus outside China in recent weeks.” “While most panelists do not see the coronavirus continuing to dampen growth beyond 2020, the proportion expecting an ongoing impact has jumped to 24% from 5% in … (the) previous poll.” The WHO (World Health Organisation) situation report on Covid-19 shows a very high-risk assessment for China and at a global level, with new countries recording cases, as well as new case in countries already showing incidence of infections. The very high-risk assessment of the WHO does not yet show a pandemic, but the CDC (Centre for Disease Control) believes it could declare it “once sustained person-to-person spread takes hold outside China”. A severe pandemic would see significantly weaker global GDP, including the likelihood of a global recession, with IMF already looking to advance financial

Figure 4: Growth rate of new cases outside China has slowed and Epidemic curve of COVID-19

Source: World Health Organisation

0

5

10

15

20

25

30

35

9-Feb-20 17-Feb-20 25-Feb-20 4-Mar-20

Change in COVID-19 - new cases

0

500

1000

23-Feb-20 27-Feb-20 2-Mar-20

Growth rate of new cases outside China

China South Korea Japan

0

500

1000

1500

2000

3-Feb-20 12-Feb-20 21-Feb-20 1-Mar-20

CasesGrowth rate of new cases

No of new cases outside China

No. of new cases China ex Hubei

Epidemic curve of confirmed COVID-19 cases




Figure 5: Economic Scenarios: updated probabilities, and some currency and interest rate updates

Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Extreme USD/Rand (average) 12.50 11.00 9.50 8.60 7.90 7.60 7.40 7.10 Up case Repo rate (end rate) 5.75 5.75 5.75 5.75 5.50 5.50 5.25 5.25 1% Fast, sustainable economic growth of 5-7% y/y. Change in political will with growth creating economic

reforms that structurally lift private sector investor confidence and fixed investment. Global growth boom (including commodities), Trump protectionism removed, SA export and domestic growth boom lifts employment and incomes, poverty eventually eliminated. Property rights strengthened, individuals obtain title deeds in EWC without disruption to economy. Fiscal consolidation, credit rating upgrades to A grade.

Up case Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 6% USD/Rand (average) 13.50 11.50 10.00 9.95 9.90 9.70 9.65 9.45 Repo rate (end rate) 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Persistent growth of 3–5%, higher probability of extreme up case. Better governance, growth-creating

reforms (structural constraints overcome), greater socio-economic stability, strengthening in property rights, individuals obtain title deeds in EWC without disruption to economy and can leverage and obtain credit. High business confidence and fixed investment growth, substantial FDI inflows, fiscal consolidation. Strong global growth and commodity cycle, ‘trade war’ subsides. Stabilisation of credit ratings, with ultimately credit rating upgrades.

Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Base USD/Rand (average) 15.00 15.30 15.00 14.50 14.05 14.30 14.55 14.15 case Repo rate (end rate) 6.25 6.00 6.00 6.00 6.00 6.00 6.00 6.00 41% Annual growth approaches 2.0% y/y by 2022. Rising confidence and investment levels over the five-year

forecast period. SA retains one investment grade (Moody’s) rating on its local currency long-term sovereign debt in 2019 and 2020 on a negative outlook. Avoids severe global risk-off environment, neutral to global risk-on. Modestly strengthening global demand to trend growth. Limited impact of EWC (expropriation without compensation) to abandoned, unused, labour tenets and government land (individuals are new owners and receive title deeds) does not have a negative effect on economy.

Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Lite USD/Rand (average) 15.50 16.50 16.80 16.10 15.80 15.90 15.70 15.30 (domestic) Repo rate (end rate) 6.75 7.00 7.25 7.25 7.25 7.25 7.00 7.00 Down case

SA is rated sub-investment grade by Moody’s but substantial repair avoids further marked downgrades. Business confidence depressed, rand weakness, significant load shedding and weak investment growth until substantial repair effected. V shaped, credit-rating-downgrade related recession. However, a neutral to risk-on global financial market environment (the international environment is that of the base case) lessens the impact of the rating downgrade. Potentially combined with expropriation of some private commercial sector property without compensation, with some negative impact on the economy.

40%

Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Severe USD/Rand (average) 16.00 17.50 18.50 19.80 19.50 18.90 18.50 18.00 down Repo rate (end rate) 7.00 7.75 8.50 9.25 10.00 10.00 9.50 9.00 case 12%

Global sharp economic slowdown resulting in a recession– could include a global financial crisis and/or a severe Covid-19 pandemic (a marked escalation of the US-China trade war seems less likely currently) – insufficient global monetary and other supports to growth. A significantly more severe recession occurs in SA than in the lite down case, marked rand weakness. Potentially combined with expropriation of private sector property (title deeds not transferred to individuals) without compensation for SA with severe negative impact on economy. SA rated sub-investment grade from all three key agencies, with further rating downgrades occurring, may eventually include widespread services load shedding and strike action.

Note: Event risk begins Q1.20. Source: Investec, Iress historical data




Figure 6: Severe down case–quarterly forecasts Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

GDP (real, %) -0.7 -2.5 -3.8 -5.1 -5.2 -3.9 -2.4 -0.7

HCE (real, %) 0.9 0.1 -0.3 -1.0 -1.4 -1.6 -1.2 -0.8

GCE (real, %) 1.0 0.6 0.7 1.8 2.0 2.2 2.2 1.4

GFCF (real, %) 1.2 -3.3 -7.6 -10.7 -12.4 -11.4 -8.6 -5.0

GDE (real, %) 1.2 -2.0 -2.4 -3.5 -4.4 -3.1 -1.4 -0.3

Export (goods & non-factor services) - (real, %) -3.9 -5.7 -9.9 -12.2 -11.6 -9.1 -5.6 -0.7

Imports (goods & non-factor services) - (real, %) 1.6 -4.4 -5.7 -7.5 -8.5 -6.0 -1.5 1.8

Balance: Current Account - (% of GDP) -4.6 -4.9 -5.2 -5.6 -5.5 -5.1 -5.0 -4.7

Unemployment rate (%) 29.0 29.3 29.4 29.5 30.0 30.6 30.9 31.2

Population (y/y, %) 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2

GFCF - Private sector (real, %) 2.7 -4.5 -9.5 -13.0 -14.1 -11.4 -7.2 -3.0

GFCF - Government (real, %) -2.1 -0.4 -3.2 -5.1 -8.6 -11.2 -11.6 -9.3

Non-residential GFCF (real, %) 2.8 -4.7 -10.4 -13.4 -14.0 -11.0 -6.7 -2.4

Residential buildings GFCF (real, %) 2.4 -2.6 -3.2 -10.6 -14.4 -14.1 -10.7 -6.8

Prime Overdraft Rate (year-end: %) 10.50 11.25 12.00 12.75 13.50 13.50 13.00 12.50

SA rand bond (year-end: %) 11.3 12.8 12.5 11.5 11.5 11.5 11.5 11.0

Consumer Inflation (Av: %) 4.9 5.1 6.2 7.2 7.5 7.2 6.7 6.4

Salary & wage increases (%) 3.7 2.7 2.8 3.1 3.7 3.2 3.3 2.9

assistance to its 189 member countries. It is currently “reviewing country by country what are the financial needs and engaging with these countries to make sure they are aware of this resource and we can immediately respond to them”. “$10b in emergency funding would be available for low-income countries through a rapid disbursement program that fell short of a full IMF rescue package. A further $40b would be available to other members through a different rapid financing instrument.” The IMF adds that already “economic and financial impact has also been felt globally, creating uncertainty and damaging near-term prospects. We are determined to provide the necessary support to mitigate the impact, especially on the most vulnerable people and countries. We have called upon the IMF to use all its available financing instruments to help member countries in need. We are confident that, working together, we will overcome the challenge facing us and restore growth”. While the severe down case in figure 5 above includes the impact of a severe global pandemic, it must Figure 7: Severe down case exchange rate forecasts Severe Down case

Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

USD/ZAR (Av) 16.00 17.50 18.50 19.80 19.50 18.90 18.50 18.00

GBP/ZAR (Av) 20.85 22.37 23.72 25.86 25.85 25.46 25.41 25.09

EUR/ZAR (Av) 17.62 18.90 20.17 21.98 21.84 21.26 21.09 20.70

ZAR/JPY (Av) 6.87 6.31 5.95 5.51 5.49 5.56 5.62 5.78

Source: Investec




Figure 8: Lite down case – quarterly forecasts Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

GDP (real, %) -0.6 -1.8 -1.6 -1.1 0.1 0.8 1.0 0.8

HCE (real, %) 1.0 0.5 0.5 0.5 0.5 0.6 0.7 0.8

GCE (real, %) 1.0 0.6 0.8 1.8 2.0 1.9 1.4 0.5

GFCF (real, %) 1.5 -2.4 -4.8 -5.3 -4.1 -1.8 -0.4 0.7

GDE (real, %) 1.3 -1.5 -1.0 -0.9 -0.5 0.7 1.2 1.0

Export (goods & non-factor services) - (real, %) -3.4 -2.5 -2.3 0.4 2.9 3.5 3.4 3.7

Imports (goods & non-factor services) - (real, %) 2.3 -2.2 -1.1 -0.4 0.3 1.8 3.5 4.7



Population (y/y, %) 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2

GFCF - Private sector (real, %) 2.9 -3.5 -6.2 -6.6 -4.3 -0.9 1.2 2.1

GFCF - Government (real, %) -1.8 0.4 -1.6 -2.1 -3.6 -3.9 -3.9 -2.4

Non-residential GFCF (real, %) 3.0 -3.7 -6.9 -6.7 -4.1 -0.5 1.6 2.4






be born in mind that these are a number of other factors as well in the scenario, which remains an international led scenario impact on SA. In particular, it does not include substantial (and sufficient) IMF, global monetary policy and other support measures internationally, and as such we have lowered the probability of the severe down case to 12% from 15%, and raised the probability of the expected case to 41% from 39%, while lowering the probability of the up case to 6% from 7% (leaving the probability of the extremely unlikely extreme up case at a statistically improbable 1% for SA). We will revise the numerical expected case in total only at the start of April once we receive the necessary data. The severe down case remains unlikely (and is now even more unlikely), unless a severe Covid-19 pandemic persists for a very lengthy time and sufficient global financial and other aid is not forthcoming globally, including for SA. It also needs to be born in mind it contains a number of other factors which are SA specific. The Focus Economics survey adds that panellists now expect that “(o)utside Asia, … (the) panellists judged that the European Union would suffer the largest economic impact from the Figure 9: Lite down case exchange rate forecasts

Lite down case Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

USD/ZAR (Av) 15.50 16.50 16.80 16.10 15.80 15.90 15.70 15.30

GBP/ZAR (Av) 20.20 21.09 21.54 21.02 20.94 21.42 21.56 21.33

EUR/ZAR (Av) 17.07 17.82 18.31 17.87 17.70 17.89 17.90 17.60

ZAR/JPY (Av) 7.09 6.70 6.55 6.77 6.77 6.60 6.62 6.80

Source: Investec




Figure 10: Gross debt-to-GDP outlook and compensation of employees

Source: National Treasury

virus. This is due to the significant outbreak in Italy and subsequent spread to neighboring countries; a reliance on external demand; and the bloc’s elderly population making fatalities and strict government intervention measures more likely.” For South Africa, the risks of a credit rating downgrade also hang over the country - SA’s recession at the end of last year, and the high and escalating planned government debt trajectory (which is even slightly above that forecast in the 2019 MTBPS), are both negative for SA’s credit ratings. We continue to believe that it will be a very close call whether Moody’s downgrades SA’s credit rating on 27th March, and so a drop to sub-investment grade is entirely possible, and is being priced in by the markets. The upwards revision to the expected case has required an upwards revision to the lite down case to 40% from 38% to reflect this. South Africa’s FRA curve continues to factor in close to 50bp of cuts in the

Figure 11: Financial support provided to State-owned companies


55.6 56.2 57.8

58.9 59.7

48.9 50.5

53.0

61.6

65.6

69.1

71.6

40

45

50

55

60

65

70

75% of GDP Gross debt-to-GDP outlook

2019 Budget 2020 Budget

0

10

20

30

40

50

60

70

80 Rbn South African Broadcasting Corporation

South African Express

Denel

South African Airways

Eskom

32.6

32.9

32.7

33.2

35.2

36.5

35.7

34.6

35.5 35.6

32

33

34

35

36

37 % Compensation of employees as share of consolidated expenditure




Figure 12: National government debt-service costs 2018/19 2019/20 2020/21 2021/22 2022/23

R million Outcome Budget Revised Medium-term estImates

Domestic loans 167,438 184,240 188,202 211,144 237,614 266,238 Short-term 29,601 25,345 28,039 25,441 28,260 31,255 Long-term 137,837 158,895 160,163 185,703 209,354 234,983

Foreign loans 14,411 17,968 16,803 18,126 20,868 23,907 As percentage of: Total 181,849 202,208 205,005 229,270 258,482 290,145

GDP 3.7 3.7 4.0 4.2 4.5 4.7 Expenditure 12.1 12.2 12.2 13.0 14.0 15.0 Revenue 14.3 14.4 15.2 16.4 17.4 18.4


repo rate for this year. SA may see a 25bp cut in its interest rates as early as this month (at the MPC meeting on 19th March), with Moody’s credit rating agency warning that SA’s monetary policy remains

Figure13: Government guarantee exposure1

2017/18 2018/19 2019/20

R billion Guarantee Exposure2 Guarantee Exposure2 Guarantee Exposure2

Public institutions 469.8 327.3 487.7 368.1 484.4 385.3

of which:

Eskom 350.0 250.6 350.0 285.6 350.0 297.4

SANRAL3 38.9 30.4 38.9 39.5 37.9 39.9

Trans-Caledon Tunnel Authority 25.7 18.9 43.0 14.3 43.0 13.5

South African Airways 19.1 11.1 19.1 15.3 19.1 17.3

Land and Agricultural Bank of South Africa

9.6 3.8 9.6 1.0 9.6 0.9

Development Bank of Southern Africa

12.2 4.1 11.4 4.3 10.0 4.6

South African Post Office 4.2 0.4 2.9 – – –

Transnet 3.5 3.8 3.5 3.8 3.5 3.8

Denel 2.4 2.4 3.4 3.4 6.9 6.9

South African Express 1.1 0.9 2.8 0.2 1.9 0.2

Industrial Development Corporation

0.4 0.1 0.5 0.1 0.5 0.1

South African Reserve Bank – – 0.3 – – –

Independent power producers 200.2 122.2 200.2 146.9 200.2 161.4

Public-private partnerships4 9.6 9.6 10.5 10.5 8.7 8.7

Source: National Treasury 1. A full list of guarantees is given in Table 11 of the statistical annexure in the Budget Review 2. Total amount of borrowing and accrued interest for the period made against the guarantee 3. The exposure in 2017/18 excludes adjustments to inflation-linked bonds as a result of inflation rate changes 4. These amount only include the national and provincial PPP agreements




Figure 14: Expected case – quarterly forecasts Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

GDP (real, %) 0.4 0.1 0.9 1.7 1.9 1.7 1.4 1.1

HCE (real, %) 1.1 0.8 1.2 1.5 1.6 1.7 1.7 1.6

GCE (real, %) 1.0 0.6 0.8 1.6 1.6 1.4 1.0 0.3

GFCF (real, %) 3.2 2.1 1.7 2.6 2.6 2.6 2.2 2.4

GDE (real, %) 1.7 -0.1 1.4 1.8 1.6 1.7 1.5 1.3

Export (goods & non-factor services) - (real, %) -0.9 1.1 1.7 5.0 5.2 4.6 4.0 4.0

Imports (goods & non-factor services) - (real, %) 3.0 -0.5 2.2 3.8 4.1 4.5 4.8 5.2



Population (y/y, %) 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2

GFCF - Private sector (real, %) 5.5 2.3 1.8 2.5 2.8 3.3 3.7 4.0

GFCF - Government (real, %) -1.8 1.4 1.5 2.9 2.1 1.0 -1.2 -1.5

Non-residential GFCF (real, %) 5.9 2.8 1.6 2.7 3.1 3.4 3.8 4.2

Residential buildings GFCF (real, %) 2.6 -0.9 3.4 0.9 1.1 2.6 3.0 2.6





tight (the repo rate is close to its current cycle high). We now expect a 25bp cut in the repo rate at the May MPC meeting. Yesterday Governor Lesetja Kganyago said “(g)iven that inflation does not appear to be falling much further, gaining more space for interest rate cuts means we would need to reduce the impact of country risk.” A looming downgrade from Moody’s, given that SA is already on a negative outlook (we believe that the 2020 Budget did not do enough to return the outlook to stable), has raised SA’s country risk. Consequently, we do not believe a March interest rate cut is likely, although it is possible, particularly if the Covid-19 fallout intensifies, although SA will need to weigh these growth consequences against the inflationary impact of likely further, substantial risk–off related rand weakness. We believe, that with the narrowest margins of probability, that Moody’s will delay its credit decision rating to its second country review of South Africa this year - in November – to assess the implementation of government’s fiscal strategy in the face of the socio-economic realities and restraints

Figure 15: Baseline or expected case exchange rate forecasts

Base line case Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

USD/ZAR (Av) 15.00 15.30 15.00 14.50 14.05 14.30 14.55 14.15

GBP/ZAR (Av) 19.55 19.56 19.24 18.94 18.62 19.27 19.98 19.72

EUR/ZAR (Av) 16.52 16.52 16.35 16.10 15.74 16.09 16.59 16.27

ZAR/JPY (Av) 7.32 7.22 7.33 7.52 7.62 7.34 7.15 7.35

Source: Investec




Figure 16: Up case – quarterly forecasts Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.20 Q4.21

GDP (real, %) 0.6 0.4 1.3 2.3 3.0 3.3 3.3 3.3

HCE (real, %) 1.2 1.1 1.8 2.4 2.9 3.1 3.1 3.1

GCE (real, %) 1.0 0.6 0.8 1.6 1.6 1.5 1.1 0.4

GFCF (real, %) 3.7 3.4 4.0 5.9 6.2 6.5 6.4 6.9

GDE (real, %) 1.9 0.4 2.3 3.1 3.1 3.6 3.5 3.4

Export (goods & non-factor services) - (real, %) -0.3 2.1 3.9 8.9 10.3 10.5 9.7 8.8

Imports (goods & non-factor services) - (real, %) 3.5 1.4 6.2 9.7 10.6 10.5 9.8 9.7



Population (y/y, %) 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2


GFCF - Government (real, %) -1.8 1.7 2.2 3.7 3.2 2.7 1.6 2.1


Residential buildings GFCF (real, %) 2.7 1.9 8.0 6.6 7.8 7.9 8.7 9.3





SA faces. The failure to stabilise the debt trajectory in the 2020 Budget will nevertheless likely see SA remain on a negative outlook in March, if it is not downgraded by Moody’s. The reweighting of the probabilities (see figure 5) is an indication that the chance of a Moody’s downgrade is very high and virtually evenly balanced with that of no downgrade occurring, while the reduction in the up case reflects a rebalancing of risks, along with the reduction in the severe down case. Should Moody’s downgrade SA in March, which is almost equally likely to occur (or even in November), then SA would transition to the lite down case as its expected case. The severe down case would be separated out into a domestic down case (likely containing the domestic elements currently in the severe down case, although these could be updated if more domestic developments that would have a downside risk appear likely) and an international down case (likely containing the international elements currently in the severe down case, although these could be updated if more domestic

Figure 17: Up case exchange rate forecasts

Up case Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

USD/ZAR (Av) 13.00 11.50 10.00 9.95 9.90 9.70 9.65 9.45

GBP/ZAR (Av) 16.94 14.70 12.82 12.99 13.12 13.07 13.25 13.17

EUR/ZAR (Av) 14.32 12.42 10.90 11.04 11.09 10.91 11.00 10.87

ZAR/JPY (Av) 8.45 9.61 11.00 10.95 10.81 10.82 10.78 11.01

Source: Investec




Figure 18: Extreme Up case – quarterly forecasts

Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

GDP (real, %) 0.7 0.6 1.6 2.8 3.7 4.2 4.5 4.6

HCE (real, %) 1.3 1.3 2.2 2.9 3.5 3.8 4.0 4.1

GCE (real, %) 1.0 0.6 0.8 1.6 1.6 1.5 1.1 0.5

GFCF (real, %) 4.0 4.5 5.9 8.5 9.2 9.7 9.8 10.6

GDE (real, %) 2.0 0.8 2.9 4.0 4.2 4.8 4.9 4.9

Export (goods & non-factor services) - (real, %) 0.2 3.1 5.6 11.8 12.8 13.4 13.3 13.0

Imports (goods & non-factor services) - (real, %) 4.1 2.9 9.1 14.1 16.1 16.5 15.8 15.0



Population (y/y, %) 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2


GFCF - Government (real, %) -1.8 1.8 2.5 4.2 4.0 3.9 3.1 4.2


Residential buildings GFCF (real, %) 3.3 3.2 10.6 10.3 11.9 12.9 14.1 14.8





developments that would have a downside risk appear likely). As indicated, the probabilities have been updated in this report to reflect the current perceived impact of Covid-19, along with currencies and interest rate forecasts for the expected case. However, the actual numerical updates to SA’s GDP growth and other metrics in the expected case will be released at the start of April once all the relevant data is available to update the model. SA’s GDP growth forecast for this year is likely to be significantly lower however, as its components drop lower. Downwards revisions to global economic growth would will also lower SA’s growth forecast for this year, while more substantial global monetary easing could cause SA to look to ease the repo rate further. A global recession would necessitate a more severe downwards revision to SA’s expected case economic outlook. Moody’s includes a peer comparison basis in its rating of SA, and so an environment where all countries’ growth rates drop lower, and the IMF steps in with financial assistance, would need to be newly factored into Moody’s considerations.

Figure 19: Extreme up case exchange rate forecasts

Extreme up Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

USD/ZAR (Av) 11.50 10.30 9.50 8.60 7.90 7.60 7.40 7.10

GBP/ZAR (Av) 14.99 13.16 12.18 11.23 10.47 10.24 10.16 9.90

EUR/ZAR (Av) 12.66 11.12 10.36 9.55 8.85 8.55 8.44 8.17

ZAR/JPY (Av) 9.55 10.73 11.58 12.67 13.54 13.82 14.05 14.65

Source: Investec



Risk Update: revisions to global growth and monetary policy expectations due to Covid-19, along with domestic factors, will impact SA’s risk outlook Thursday 5 March 2020 Appendix: evolution of previous scenarios

Figure 20: Economic Scenarios – up case or scenario

Q1:20 Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Up case Rand/USD (average) 13.00 11.50 10.00 9.95 9.90 9.70 9.65 9.45 7% Repo rate (end rate) 6.25 6.25 6.25 6.00 6.00 6.00 6.00 6.00 Persistent growth of 3–5%, higher probability of extreme up case. Better governance, growth-

creating reforms (structural constraints overcome), greater socio-economic stability, strengthening in property rights, individuals obtain title deeds in EWC without disruption to economy and can leverage and obtain credit. High business confidence and fixed investment growth, substantial FDI inflows, fiscal consolidation. Strong global growth and commodity cycle, ‘trade war’ subsides. Stabilisation of credit ratings, with ultimately credit rating upgrades.

Q4:19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Up case Rand/USD (average) 14.01 14.38 14.69 13.00 11.50 10.00 9.95 9.90

7% Repo rate (end rate) 6.75 6.75 6.50 6.25 6.25 6.25 6.00 6.00 Persistent growth of 3–5%, higher probability of extreme up case. Better governance, growth-

creating reforms (structural constraints overcome), greater socio-economic stability, strengthening in property rights, individuals obtain title deeds in EWC without disruption to economy and can leverage and obtain credit. High business confidence and fixed investment growth, substantial FDI inflows, fiscal consolidation. Strong global growth and commodity cycle, ‘trade war’ subsides. Stabilisation of credit ratings, with ultimately credit rating upgrades.

Q3:19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Up case 10%

Rand/USD (average) 14.01 14.38 13.00 11.50 10.00 9.95 9.90 9.70 Repo rate (end rate) 6.75 6.75 6.25 6.25 6.25 6.00 6.00 6.00

Persistent growth of 3–5%, higher probability of extreme up case. Better governance, growth creating reforms (structural constraints are overcome), greater socio-economic stability, strengthening in property rights, individuals obtain title deeds in EWC without disruption to economy. High business confidence and fixed investment growth, substantial FDI inflows, fiscal consolidation. Strong global growth and commodity cycle, ‘trade war’ subsides. Stabilisation of credit ratings, with ultimately credit rating upgrades.

Q2:19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Up case 10%

Rand/USD (average) 14.01 12.00 10.90 10.40 10.00 9.95 9.90 9.70

Repo rate (end rate) 6.75 6.50 6.50 6.50 6.50 6.25 6.25 6.25

Persistent growth of 3.0 – 5.0%, higher probability of extreme up case. Better governance, growth creating reforms in line with global norms (structural constraints are overcome) and greater socio-economic stability, individuals obtain title deeds to land they live on (EWC) without disruption to economy. High business confidence, fixed investment growth in double digits, substantial FDI inflows, fiscal consolidation. Strong global growth and commodity cycle – but US does not hike interest rates in 2019, ‘trade war’ subsides. Stabilisation of credit ratings, with ultimately credit rating upgrades.

Note: Event risk begins Q1.20, historical scenario runs aligned with approved processes




Figure 21: Economic Scenarios – extreme up case

Q1.20 Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Extreme Rand/USD (average) 11.50 10.30 9.50 8.60 7.90 7.60 7.40 7.10 Up case Repo rate (end rate) 6.00 6.00 5.75 5.75 5.50 5.50 5.25 5.25 1% Fast, sustainable economic growth of 5-7% y/y. Change in political will with growth creating

economic reforms that structurally lift private sector investor confidence and fixed investment. Global growth boom (including commodities), Trump protectionism removed, SA export and domestic growth boom lifts employment and incomes, poverty eventually eliminated. Property rights strengthened, individuals obtain title deeds in EWC without disruption to economy. Fiscal consolidation, credit rating upgrades to A grade.

Q4.19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Extreme Rand/USD (average) 14.01 14.38 14.69 11.50 10.30 9.50 8.60 7.90 Up case Repo rate (end rate) 6.75 6.75 6.50 6.00 6.00 5.75 5.75 5.50 1% Fast, sustainable economic growth of 5-7% y/y. Change in political will with growth creating

economic reforms that structurally lift private sector investor confidence and fixed investment. Global growth boom (including commodities), Trump protectionism removed, SA export and domestic growth boom lifts employment and incomes, poverty eventually eliminated. Property rights strengthened, individuals obtain title deeds in EWC without disruption to economy. Fiscal consolidation, credit rating upgrades to A grade.

Q3.19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Extreme Rand/USD (average) 14.01 14.38 11.50 10.30 9.50 8.60 7.90 7.60 Up case Repo rate (end rate) 6.75 6.75 6.00 6.00 5.75 5.75 5.50 5.50 1% Fast, sustainable economic growth of 5-7% y/y plus. Change in political will with growth

creating economic reforms that structurally lift private sector investor confidence and fixed investment. Global growth boom (including commodities), Trump protectionism removed, SA export and domestic growth boom lifts employment and incomes, poverty eventually eliminated. Property rights strengthened, individuals obtain title deeds in EWC without disruption to economy. Fiscal consolidation, credit rating upgrades to A grade.

Q2.19 Extreme

Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20

Rand/USD (average) 14.01 11.00 10.30 9.50 8.60 7.90 7.60 7.40

Up case Repo rate (end rate) 6.75 6.25 6.25 6.00 6.00 5.50 5.50 5.50 1% Fast, sustainable economic growth of 5.0-7.0% y/y plus. SA sees change in political will with

growth creating economic reforms in line with global norms that structurally lift private sector investor confidence and so fixed investment. Global growth boom (including commodities), Trump protectionism removed, US does not hike interest rates in 2019, SA export and domestic growth boom lifts employment and incomes to the degree that poverty is eliminated (individuals obtain title deeds to land they live on (EWC) without disruption to economy). Fiscal consolidation, credit rating upgrades to A grade.





Figure 22: Transition of the severe down case from the extreme down case (excludes recent updates)

Q1.20 Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Severe Rand/USD (average) 16.00 17.50 18.50 19.80 19.50 18.90 18.50 18.00 down Repo rate (end rate) 7.00 7.75 8.50 9.25 10.00 10.00 9.50 9.00 case 15%

Continued global sharp economic slowdown resulting in a global recession, on a marked escalation of the US-China trade war – may include a global financial crisis. May also include severe escalation of US Middle East military conflict. A significantly more severe recession occurs in SA than in the lite down case, marked rand weakness, may eventually include widespread services load shedding and strike action. Potentially combined with expropriation of private sector property (title deeds not transferred to individuals) without compensation – severe negative impact on economy. SA rated sub-investment grade from all three key agencies, with further rating downgrades occurring.


Continued global sharp economic slowdown resulting in a global recession, on a marked escalation of the US-China trade war – may include a global financial crisis. SA rated sub-investment grade from all three key agencies, with further rating downgrades. A significantly more severe recession occurs in SA than in the lite down case, marked rand weakness, may eventually include widespread services load shedding and strike action. Potentially combined with expropriation of private sector property (title deeds not transferred to individuals’ nationalisation) without compensation – severe negative impact on economy.


Expropriation of private sector property (title deeds not transferred to individuals nationalisation) without compensation, wide scale land grabs. Confidence and investment depressed, marked rand weakness, significant strike action and widespread electricity, water and other services load shedding. SA sub-investment grade, further credit downgrades. Faster than expected global (US) monetary policy normalisation, general market risk-off, global sharp economic slowdown (commodity slump), marked escalation of US-China trade war – US recession, short global financial crisis. Material risk of further credit rating downgrades to junk for SA, and significantly more severe recession than in lite down case.

Q2.19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Extreme Rand/USD (average) 14.01 18.00 20.00 22.00 24.00 25.50 26.00 25.50 down Repo rate (end rate) 6.75 10.00 14.00 16.50 18.00 21.00 21.50 22.00 case 10%

Wide scale expropriation of private sector property (assets and land) rights without compensation with state as custodian. Credit ratings junk & sovereign debt default - state bankruptcy/failed state. Partial to no payment of public sector employees’ wages and social grants, persistent government services outages and rolling mass strike action, civil unrest/war. Global economy falls into recession, severe global trade war, severe lengthy global financial crisis, SA economic depression.





Figure 23: Economic Scenarios – Lite down case

Q1.20 Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Lite Down USD/Rand (average) 15.50 16.50 16.80 16.10 15.80 15.90 15.70 15.30 Case Repo rate (end rate) 6.75 7.25 7.25 7.25 7.25 7.25 7.25 7.25 38% SA is rated sub-investment grade by Moody’s but substantial repair avoids further marked

downgrades. Business confidence depressed, rand weakness, significant load shedding and weak investment growth until substantial repair effected. V shaped, credit-rating-downgrade related recession. However, a neutral to risk-on global financial market environment (the international environment is that of the base case) lessens the impact of the rating downgrade. Potentially combined with a modest expropriation of some private commercial sector property without compensation, with modest negative impact on economy.

Q4.19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Lite Down Rand/USD (average) 14.01 14.38 14.69 15.80 16.50 16.30 15.50 15.15 case Repo rate (end rate) 6.75 6.75 6.50 6.75 7.25 7.25 7.25 7.25 37% SA is rated sub-investment grade by Moody’s but substantial repair avoids further marked

downgrades. Business confidence depressed, marked rand weakness, significant load shedding and weak investment growth until substantial repair effected. V shaped, credit rating downgrade-related recession. However, a neutral to risk-on global financial market environment (the international environment is that of the base case) lessens the impact of the rating downgrade. Potentially combined with a modest expropriation of some private commercial sector property without compensation, with limited impact on economy.

Q3.19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Lite Down Rand/USD (average) 14.01 14.38 15.50 17.00 16.50 15.50 15.15 14.90 case Repo rate (end rate) 6.75 6.75 7.50 8.50 7.50 7.50 7.50 7.25 35% Partial expropriation of (certain groups’) private commercial sector property (including

productive land) without compensation. Business confidence depressed, marked rand weakness, significant load shedding and weak investment growth. SA sub-investment grade Moody’s rating but substantial repair avoids further marked downgrades. SA experiences a V shaped, credit rating downgrade related, recession. However, modestly strengthening global demand and elevated commodity prices help lessen the longer-term impact of domestic disturbances. Sedate global monetary policy normalisation occurs – a severe global risk-off environment is avoided, with neutral to global risk-on.

Q2.19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Down Rand/USD (average) 14.01 16.50 17.10 18.50 19.60 18.00 17.65 17.45 case Repo rate (end rate) 7.00 7.50 8.00 8.50 8.50 8.50 8.50 9.00 37% Partial expropriation of (certain groups’) private commercial sector property (including

productive land) without compensation, plus wide scale land grabs, title deeds not transferred to individuals. Confidence and investment depressed, marked rand weakness, significant strike action and widespread load shedding. SA sub-investment grade, increased chance of further credit downgrades. Faster than expected global (US) monetary policy normalisation, general market risk-off, global sharp economic slowdown (commodity slump), marked escalation of US-China trade war, short global financial crisis (SA V shaped recession).





Figure 24: Economic Scenarios – base case

Q1 20 Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Base line Rand/USD (average) 15.00 15.30 15.00 14.50 14.05 14.30 14.55 14.15 case 39% Repo rate (end rate) 6.25 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Annual growth approaches 2.0% y/y by 2022. Rising confidence and investment levels over the

five-year forecast period. SA retains one investment grade (Moody’s) rating on its local currency long-term sovereign debt in 2019 and 2020 on a negative outlook. Avoids severe global risk-off environment, neutral to global risk-on. Modestly strengthening global demand to trend growth. Limited impact of EWC (expropriation without compensation) to abandoned, unused, labour tenets and government land (individuals are new owners and receive title deeds) does not have a negative effect on economy.

Q4 19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Base line Rand/USD (average) 14.01 14.38 14.69 14.65 14.15 14.45 14.65 14.00 case 40% Repo rate (end rate) 6.75 6.75 6.50 6.50 6.50 6.50 6.50 6.50 Annual growth rate of close to 2.0% y/y reached by 2021, 3.0% y/y by 2024. Higher

confidence and investment levels occur over the five-year forecast period than in the period of 2009 to 2018. Rand nears PPP by 2023. SA retains one investment grade (Moody’s) rating on its local currency long-term sovereign debt in 2019 and 2020 on a negative outlook. Avoids severe global risk-off environment, neutral to global risk-on. Modestly strengthening global demand to trend growth. Limited impact of EWC (expropriation without compensation) to abandoned, unused, labour tenets and government land (individuals are new owners and receive title deeds) does not have significant negative effect on economy.

Q3 19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Base line Rand/USD (average) 14.01 14.38 14.30 13.90 13.40 13.70 13.90 13.30 case 45% Repo rate (end rate) 6.75 6.75 6.50 6.50 6.50 6.50 6.50 6.50 Annual growth rate of 2.0% y/y reached by 2020, 3.0% y/y by 2024. Higher confidence and

investment levels than past decade, limited impact of EWC/expropriation without compensation (to abandoned and unused land of government and agricultural sector – individuals are new owners and receive title deeds). Rand structurally stronger nears PPP by 2021. SA retains one investment grade (Moody’s) rating on its local currency long-term sovereign debt in 2019. Sedate global monetary policy normalisation – avoid severe global risk-off environment, neutral to global risk-on. Modestly strengthening global demand.

Q2 19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Base line Rand/USD (average) 14.01 14.30 14.60 14.00 13.20 13.90 14.10 13.30 case 42% Repo rate (end rate) 6.75 6.75 6.75 6.75 6.75 7.00 7.00 7.00 Annual growth rate of 2.0% y/y reached by 2019, 3.0% y/y by 2023. Higher confidence and

investment levels than past decade, limited impact of EWC/expropriation without compensation (to abandoned and unused land of government and agricultural sector – individuals are new owners and receive title deeds). Rand structurally stronger, nears PPP by 2021. SA retains one investment grade (Moody’s) rating on its local currency long-term sovereign debt this year. Sedate global monetary policy normalisation – avoid severe global risk-off environment, neutral to global risk-on. Modestly strengthening global demand.





Figure 25: Extreme down case – quarterly forecasts

Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

GDP (real, %) -0.9 -3.8 -6.1 -8.2 -9.0 -7.8 -5.5 -3.1

HCE (real, %) 0.8 -0.2 -0.8 -2.0 -2.8 -3.2 -3.3 -2.9

GCE (real, %) 1.0 0.6 0.7 1.8 2.3 2.7 2.7 2.1

GFCF (real, %) 0.8 -4.8 -10.7 -15.9 -19.0 -19.3 -17.1 -12.5

GDE (real, %) 1.1 -2.6 -3.8 -5.8 -7.1 -6.2 -4.3 -2.4

Export (goods & non-factor services) - (real, %) -6.2 -10.4 -17.5 -21.5 -21.2 -18.2 -12.3 -5.9

Imports (goods & non-factor services) - (real, %) 0.9 -6.2 -9.3 -12.1 -13.7 -11.7 -7.3 -3.9



Population (y/y, %) 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2

GFCF - Private sector (real, %) 2.1 -6.6 -13.1 -18.8 -21.3 -20.0 -16.3 -11.0

GFCF - Government (real, %) -2.1 -0.7 -4.8 -8.8 -13.8 -17.7 -18.7 -15.6

Non-residential GFCF (real, %) 2.0 -7.0 -14.2 -19.4 -21.2 -19.5 -15.7 -10.2






The extreme down case has been included at the end of the document for comparison purposes.

Figure 26: Extreme Down case exchange rate forecasts

Extreme up Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21

USD/ZAR (Av) 18.00 20.00 22.00 24.00 25.50 26.00 25.50 25.15

GBP/ZAR (Av) 23.64 26.13 28.63 31.91 34.43 35.62 35.56 35.07

EUR/ZAR (Av) 19.98 22.60 25.19 27.60 30.09 31.20 31.37 31.44

ZAR/JPY (Av) 5.92 5.30 4.80 4.35 4.16 4.08 4.16 4.21

Source: Investec




Figure 27: Economic Scenarios – Extreme down case or scenario 6

Q1.20 Q1.20 Q2.20 Q3.20 Q4.20 Q1.21 Q2.21 Q3.21 Q4.21 Extreme down case

X%

USD/Rand (average) 18.00 20.00 22.00 24.00 25.50 26.00 25.50 25.20 Repo rate (end rate) 8.50 10.00 14.00 16.50 18.00 21.00 21.50 22.00 Wide scale expropriation of private sector property (assets and land) rights without compensation with state as custodian. Credit ratings junk & sovereign debt default - state bankruptcy/failed state. Partial to no payment of public sector employees’ wages and social grants, persistent government services outages and rolling mass strike action, civil unrest/war. Global economy falls into recession, severe global trade war, severe lengthy global financial crisis, SA economic depression.

Q4.19 Q1.19 Q2.19 Q3.19 Q4.19 Q1.20 Q2.20 Q3.20 Q4.20 Extreme Rand/USD (average) 14.01 14.38 14.69 18.00 20.00 22.00 24.00 25.50 down Repo rate (end rate) 6.75 6.75 6.50 8.50 10.00 14.00 16.50 18.00 case X%









Risk Update: revisions to global growth and monetary policy expectations due to Covid-19, along with domestic factors, will impact SA’s risk outlook Thursday 5 March 2020 Disclaimer For the purposes of this disclaimer, Investec shall include Investec Bank Limited, its ultimate holding company, a subsidiary (or a subsidiary of a subsidiary) of that entity, a holding company of that entity or any other subsidiary of that holding company, and any affiliated entity of any such entities. “Investec Affiliates” shall mean any directors, officers, representatives, employees, advisers or agents of any part of Investec.

The information and materials presented in this report are provided to you solely for general information and should not be considered as an offer or solicitation of an offer to sell, buy or subscribe to any securities or any derivative instrument or any other rights pertaining thereto.

The information in this report has been compiled from sources believed to be reliable, but neither Investec nor any Investec Affiliates accept liability for any loss arising from the use hereof or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this report. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. The information in this report and the report itself is subject to change without notice. This report as well as any other related documents or information may be incomplete, condensed and/or may not contain all material information concerning the subject of the report; its accuracy cannot be guaranteed. There is no obligation of any kind on Investec or any Investec Affiliates to update this report or any of the information, opinions, forecasts or estimates contained herein.

Investec (or its directors, officers or employees) may, to the extent permitted by law, own or have a position or interest in the financial instruments or services referred to herein, and may add to or dispose of any such position or may make a market or act as a principal in any transaction in such financial instruments. Investec (or its directors, officers or employees) may, to the extent permitted by law, act upon or use the information or opinions presented herein, or research or analysis on which they are based prior to the material being published. Investec may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. The value of any securities or financial instruments mentioned in this report can fall as well as rise. Foreign currency denominated securities and financial instruments are subject to fluctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such securities or financial instruments. Certain transactions, including those involving futures, options and other derivative instruments, can give rise to substantial risk and are not suitable for all investors.

This report does not contain advice, except as defined by the Corporations Act 2001 (Australia). Specifically, it does not take into account the objectives, financial situation or needs of any particular person. Investors should not do anything or forebear to do anything on the basis of this report. Before entering into any arrangement or transaction, investors must consider whether it is appropriate to do so based on their personal objectives, financial situation and needs and seek financial advice where needed.

No representation or warranty, express or implied, is or will be made in relation to, and no responsibility or liability is or will be accepted by Investec or any Investec Affiliates as to, or in relation to, the accuracy, reliability, or completeness of the contents of this report and each entity within Investec (for itself and on behalf of all Investec Affiliates) hereby expressly disclaims any and all responsibility or liability for the accuracy, reliability and completeness of such information or this research report generally.

The securities or financial instruments described herein may not have been registered under the US Securities Act of 1933, and may not be offered or sold in the United States of America or to US persons unless they have been registered under such Act, or except in compliance with an exemption from the registration requirements of such Act. US entities that are interested in trading securities listed in this report should contact a US registered broker dealer.

For readers of this report in South Africa: this report is produced by Investec Bank Limited, an authorised financial services provider and a member of the JSE Limited.

For readers of this report in United Kingdom and Europe: this report is produced by Investec Bank Plc (“IBP”) and was prepared by the analyst named in this report. IBP is authorised by the Prudential Regulation Authority and regulated by the Financial



Risk Update: revisions to global growth and monetary policy expectations due to Covid-19, along with domestic factors, will impact SA’s risk outlook Thursday 5 March 2020 Conduct Authority and the Prudential Regulation Authority and is a member of the London Stock Exchange. This report is not intended for retail clients and may only be issued to professional clients and eligible counterparties, and investment professionals as described in S19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005.

For readers of this report in Ireland: this report is produced by Investec Bank plc (Irish Branch) and was prepared by the analyst named in this report. Investec Bank plc (Irish Branch) is authorised by the Prudential Regulation Authority in the United Kingdom and is regulated by the Central Bank of Ireland for conduct of business rules.

For readers of this report in Australia: this report is issued by Investec Australia Limited, holder of Australian Financial Services License No. 342737 only to ‘Wholesale Clients’ as defined by S761G of the Corporations Act 2001.

For readers of this report in Hong Kong: this report is distributed in Hong Kong by Investec Capital Asia Limited, a Securities and Futures Commission licensed corporation (Central Entity Number AFT069) and is intended for distribution to professional investors (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)) only. This report is personal to the recipient and any unauthorised use, redistribution, retransmission or reprinting of this report (whether by digital, mechanical or other means) is strictly prohibited.

For readers of this report in India: this report is issued by Investec Capital Services (India) Private Limited which is registered with the Securities and Exchange Board of India.

For readers of this report in Singapore: this report is produced by IBP and issued and distributed in Singapore through Investec Singapore Pte. Ltd. (“ISPL”), an exempt financial adviser which is regulated by the Monetary Authority of Singapore as a capital markets services licence holder. This material is intended only for, and may be issued and distributed in Singapore only to, accredited investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289 (“SFA”). This material is not intended to be issued or distributed to any retail or other investors. ISPL may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients of this document should contact ISPL at the above address in respect of any matters arising from, or in connection with, this report.

For readers of this report in Canada: this report is issued by IBP, and may only be issued to persons in Canada who are able to be categorised as a “permitted client” under National Instrument 31-103 Registration Requirements and Exemptions or to any other person to whom this report may be lawfully directed. This report may not be relied upon by any person other than the intended recipient.

The distribution of this document in other jurisdictions may be prohibited by rules, regulations and/or laws of such jurisdiction. Any failure to comply with such restrictions may constitute a violation of United States securities laws or the laws of any such other jurisdiction.

This report may have been issued to you by one entity within Investec in the fulfilment of another Investec entity’s agreement to do so. In doing so, the entity providing the research is in no way acting as agent of the entity with whom you have any such agreement and in no way is standing as principal or a party to that arrangement.

This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of an entity within Investec. Securities referred to in this report may not be eligible for sale in those jurisdictions where an entity within Investec is not authorised or permitted by local law to do so. In the event that you contact any representative of Investec in connection with receipt of this report, including any analyst, you should be advised that this disclaimer applies to any conversation or correspondence that occurs as a result, which is also engaged in by Investec and any relevant Investec Affiliate solely for the purposes of providing general information only. Any subsequent business you choose to transact shall be subject to the relevant terms thereof. We may monitor e-mail traffic data and the content of email. Calls may be monitored and recorded. Investec does not allow the redistribution of this report to non-professional investors or persons outside the jurisdictions referred to above and Investec cannot be held responsible in any way for third parties who effect such redistribution or recipients thereof. © 2019

Risk Update: revisions to global growth and monetary policy ......Risk Update: revisions to global...

Documents

Transcript of Risk Update: revisions to global growth and monetary policy ......Risk Update: revisions to global...