Further South African interest rate cuts are unlikely

2018 ◽  
Keyword(s):  
Interest Rates ◽  
South African ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Reserve Bank ◽  
Capital Outflows ◽  
Repo Rate ◽  
Low Levels ◽  
Domestic Inflation

Subject South African inflation dynamics. Significance South African Reserve Bank (SARB) Governor Lesetja Kganyago highlighted in a May 8 speech the increasingly unpredictable global environment and risks to inflation. Domestic inflation has been at unusually low levels in recent months, surprising the market and SARB on the downside thanks mainly to currency strength and moderating food price pressures. On March 28, the SARB cut the benchmark repo rate for only the second time in six years. However, international factors have seen the currency come under pressure recently, reversing the gains seen following President Cyril Ramaphosa’s ascent to the ANC leadership in December. Impacts With monetary policy likely proving cautious in the short term, pressure will grow on Ramaphosa to push through structural reforms. Holding interest rates constant will help to mitigate capital outflows and provide some support for the currency. Barring a currency crash, the next interest rates move will likely be up -- late this year or next year.

South African turnaround strategy may disappoint

2018 ◽  
Keyword(s):  
Interest Rates ◽  
South African ◽  
Economic Reforms ◽  
Inflation Expectations ◽  
Structural Reforms ◽  
Content Type ◽  
Reserve Bank ◽  
Do So

Significance After the economy's recent shock entry into technical recession, Ramaphosa's administration is attempting to show its commitment to growth-boosting reforms. Impacts The reserve bank will be loath to hike interest rates but may be forced to do so in the coming months to curb rising inflation expectations. Mooted structural reforms may not go far enough to placate investors. Persistent ANC infighting could undermine Ramaphosa’s efforts to pursue contested economic reforms prior to 2019 polls.

South African 2020 budget may delay Moody's downgrade

2020 ◽  
Keyword(s):  
South African ◽  
Civil Servants ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Political Contention

Significance While the measures have been welcomed by investors, they depend on Pretoria reaching a deal with civil servants, whose unions have denounced the government’s plans. Impacts Despite commitments to a series of growth-boosting structural reforms outlined last year, progress will likely remain halting. Renewed funding for embattled South African Airways (SAA) will be a recurring source of public and political contention over the short term. Debt costs could rise further if a ratings downgrade sees investors demand even higher yields on South African debt.

South Africa's Mboweni will aid Ramaphosa reform push

2018 ◽  
Keyword(s):  
South African ◽  
Credit Rating ◽  
Short Term ◽  
Content Type ◽  
Rating Agencies ◽  
Reserve Bank ◽  
Freedom Fighters ◽  
Left And Right ◽  
The Government

Significance A former South African Reserve Bank (SARB) governor and minister of labour, Mboweni faces a crucial first few weeks in his new post as the government attempts to placate rating agencies and engineer an economic turnaround. Mboweni’s initial moves may be determined by Moody’s credit rating review expected today. Impacts In the short term, Mboweni’s appointment will be a boost for Ramaphosa’s bid for fiscal consolidation and growth. In the medium-to-long term, Mboweni will likely prove a more polarising figure inside the ANC than Nene. Allegations linking the Economic Freedom Fighters with a major banking scandal could give Mboweni and the ANC an early political 'win'. Mboweni's previous social media utterances could be further exploited by opponents, both left and right, in the months ahead.

Czech vote may raise chances of new ANO-led government

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Household Consumption ◽  
Capacity Constraints ◽  
Consumer Confidence ◽  
Structural Reforms ◽  
Medium Term ◽  
Short Term ◽  
Public And Private ◽  
Content Type

Significance Now that Zeman has successfully retaken the presidency with 152,000 more votes than his pro-Western rival Jiri Drahos after a campaign that was dominated by domestic issues, attention will focus once again on forming a majority government after the largest parliamentary party, ANO 2011, lost a vote of confidence on January 16. Impacts Consumer confidence may strengthen in the short term as the old ANO-CSSD government’s policies take effect, providing an economic boost. Robust household consumption and public- and private-backed investment may also contribute to stronger GDP this year. Although monetary policy is set to tighten, in response to signs of overheating, interest rates will remain at historic lows. The outlook for the economy in the short term is upbeat, with a strong outturn expected for the fourth quarter of 2017. Structural reforms will be required over the medium term to reduce the risk of capacity constraints, especially in industry.

South African Reserve Bank will reaffirm independence

2020 ◽  
Keyword(s):  
Interest Rates ◽  
South African ◽  
Banking Sector ◽  
Debt Relief ◽  
Quantitative Easing ◽  
Medium Term ◽  
Content Type ◽  
Reserve Bank

Significance Although the bank has acted on various fronts to support the economy, including a limited bond-buying programme, it continues to resist calls for full-blown quantitative easing (QE), and to fend off efforts which would threaten its independence. Impacts Lower interest rates will provide some relief for households and businesses but will not prevent a sharp economic contraction this year. The SARB’s efforts to make it easier for the banking sector to provide debt relief for customers will likely be extended. With most of SARB’s top leadership remaining in situ for 4-5 years, its independence and credibility should be secure over the medium term.

India’s growth may have macroeconomic costs

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Public Debt ◽  
Central Government ◽  
Content Type ◽  
Reserve Bank ◽  
Growth Prospects ◽  
Repo Rate ◽  
Bankruptcy Code ◽  
Bad Debt ◽  
Reserve Bank Of India

Subject Indian growth is high but public debt is rising. Significance Despite evidence that demonetisation slowed the economy in the first quarter of 2017, India is likely to revert again to being one of the fastest growing economies in the world. However, India’s level of public debt is higher than in many other emerging markets while bank credit is slowing, threatening the country’s growth prospects. Impacts Central government will increase expenditure on investment. The Reserve Bank of India (RBI) will be pressed to cut interest rates further, after today reducing the repo rate by 25 basis points to 6%. India’s new Insolvency and Bankruptcy Code should help to ease the problem of bad debt and non-performing loans.

How loan interest rate liberalization affects firms’ loan maturity structure

2014 ◽  
Vol 4 (2) ◽  
pp. 153-167 ◽  
Author(s):  
Jianfang Zhou ◽  
Jingjing Wang ◽  
Jianping Ding
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Manufacturing Companies ◽  
Short Term ◽  
Data Set ◽  
Content Type ◽  
Interest Rate Liberalization ◽  
Upper Limit ◽  
Maturity Structure

Purpose – After loan interest rate upper limit deregulation in October 2004, the financing environment in China changed dramatically, and the banks were eligible for risk compensation. The purpose of this paper is to focus on the influence of the loan interest rate liberalization on firms’ loan maturity structure. Design/methodology/approach – Based on Rajan's (1992) model, the authors constructed a trade-off model of how the banks choose long-term and short-term loans scales, and further analyzed banks’ loan term decisions under the loan interest rate upper limit deregulation or collateral cases. Then the authors used an unbalanced panel data set of 586 Chinese listed manufacturing companies and 9,376 observations during the period 1996-2011 to testify the theoretical conclusion. Furthermore, the authors studied the effect on firms with different characteristics of ownership or scale. Findings – The results show that the loan interest rate liberalization significantly decreases the private companies’ reliance on short-term loans and increases sensitivity to interest rates of state-owned companies’ long-term loans. But the results also show that the companies’ ownership still plays a key role on the long-term loans availability. When monetary policy tightened, small companies still have to borrow short-term loans for long-term purposes. As the bank industry is still dominated by state-owned banks and the deposit interest rate has upper limits, the effect of the loan interest rate liberalization on easing long-term credit constraints is limited. Originality/value – From a new perspective, the content and findings of this paper contribute to the study of the effect of the interest rate liberalization on China economy.

Politics set to slow Pakistan's divestment drive

2016 ◽  
Keyword(s):  
Public Sector ◽  
Economic Reform ◽  
Prime Minister ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Reform Agenda ◽  
Political Patronage ◽  
The Government ◽  
Core Condition

Subject Pakistan's divestment drive. Significance Prime Minister Nawaz Sharif's government describes divestment of public sector enterprises (PSEs), involving 69 firms, as an essential part of its 2013-18 economic reform agenda. Progress thus far is limited, but the government faces rising pressure from the IMF, which made divestment a core condition of its 6.6-billion-dollar, three-year loan in September 2013. Impacts Another government led by Sharif would continue gradual divestments after 2018. Since PSEs are an important vector for distributing political patronage, structural reforms will face stiff resistance. Divestment of profitable PSEs defeats the purpose of the exercise, but the government will use them for a short-term cash boost.

Weak consumption may thwart Slovak growth plans

2016 ◽  
Keyword(s):  
Infrastructure Investment ◽  
Gdp Growth ◽  
Industrial Output ◽  
Short Term ◽  
Fiscal Deficits ◽  
Consumption Growth ◽  
Content Type ◽  
Low Levels ◽  
The Government ◽  
The Eu

Subject The government's latest GDP expectations for 2016-19. Significance On September 19, days before surviving a parliamentary no-confidence vote, the government announced GDP projections for 2016-19, based on improvements in consumption growth and the labour market, where registered unemployment hovers at historically low levels. Despite its weakened position following the recent departure of junior coalition partner Siet, Smer-Social Democracy (SD) is upbeat about the prospects for robust GDP growth in 2016, revising its forecast upwards to 3.6% from 3.2%. Impacts Industrial output, GDP and inflationary pressures may pick up post-2018, as consumers spend more and auto industry investments create jobs. The government may miss its targets in the short term, but fiscal deficits should remain below the EU limit of 3% of GDP in 2016-18. More public-private partnerships, modelled on the Bratislava ring-road, plus EU funding, may support infrastructure investment after 2017.

Japan will stay the course on monetary easing

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Quantitative Easing ◽  
Content Type ◽  
Bank Of Japan ◽  
Target Date ◽  
Low Levels ◽  
Global Economic Growth ◽  
First Time

Subject Monetary policy in Japan. Significance The monetary policy board of the Bank of Japan (BoJ) at its last meeting abandoned its prediction of when the nation will reach its 2% inflation target, the first time it has omitted a target date since Governor Haruhiko Kuroda introduced his policy of radical monetary easing five years ago. Impacts Japan’s interest rates will remain at historically low levels for at least two more years. The yen will remain relatively weak as other countries’ central banks end their quantitative easing programmes. A weak currency plus widespread global economic growth will create strong demand for Japanese exports.

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