As the first case of coronavirus was confirmed in South Africa yesterday, the country plunged further into its state of recession with the weakening of the rand, surrendering the gains it made earlier on the narrowing of the current account deficit.
The rand fell to R15.53 against the dollar at 4.14pm as the market digested the news of the confirmation of the virus, and by 5pm, the currency exchanged hands 17 cents lower against the greenback at R15.5204.
Banking stocks also retreated 0.89 percent to 7742.89 points, while mining stocks also fell 0.54 to 40433.47 points. The JSE All Share Index and the Top 40 Index remained flat.
Peregrine Treasury Solutions’ Bianca Botes said the market had been rattled by the confirmation of the virus in the country: “The markets are on edge, with many questioning the ability of the government to deal with a breakout in South Africa efficiently,” she said.
Earlier, the rand took slight relief after data showed the current account deficit narrowed to its lowest in nearly a decade in the last quarter of 2019.
The SA Reserve Bank said that the deficit narrowed to 1.3percent of gross domestic product (GDP) from a shortfall of 3.7percent in the third quarter.
The central bank said that the deficit on the current account of the balance of payments eased by R120billion to R68.1bn in the fourth quarter of 2019 from R188.1bn in the third quarter.
As a ratio of GDP the current account deficit narrowed further to 1.3percent from 3.7percent in the same period. On an annual basis, the ratio narrowed to 3percent in 2019 from 3.5percent in 2018.
The trade balance showed a wider surplus of R102.5bn in the fourth quarter, more than double the revised R44bn surplus in the previous three months.
The SA Chamber of Commerce and Industries also said business confidence rose marginally in February on lower inflation, increased imports and new vehicles sales.
However, the rand had tracked emerging-market currencies that weakened as investors weighed the spread of the coronavirus and California calling a state of emergency.
Investec chief executive Annabel Bishop said revisions to global growth and monetary policy expectations due to the coronavirus along with domestic factors would impact South Africa’s risk outlook. She said South Africa had seen risks increase from the global and domestic perspective.
“Covid-19 was now expected to have a much greater impact on global economic growth than previously thought,” Bishop said.
The International Monetary Fund this week said that global growth would dip below last year’s 2.9percent.
Bishop said the escalating pandemic would see significantly weaker global GDP and the likelihood of a recession.
“A global recession would necessitate a more severe downwards revision to South Africa’s expected case economic outlook,” she said.