Monthly Market Update – 03/2021
South Africa returned to lockdown level 1 on the first of March, an encouraging start to the month for lockdown fatigued citizens. However, the extremely slow pace of vaccine rollouts means the country is still highly vulnerable and at risk of a third wave.
During its March meeting, the Reserve Bank’s Monetary Policy Committee decided to keep the repo rate unchanged at a record low of 3.5%. The SARB remained cautious on SA’s growth outlook, only moderately increasing its forecast for 2021 economic growth from 3.6% to 3.8%.
Despite most emerging market currencies coming under pressure this year, the rand finished the quarter as one of the best performing currencies relative to its emerging market peers. The favourable global macroeconomic backdrop should benefit emerging markets, including South Africa, in the quarters ahead. Economic growth is expected to recover in 2021, albeit from a low base.
March was mostly more of the same for global markets. Vaccine rollouts continued to gather pace in major developed markets. This is despite new COVID-19 lockdowns in many parts of Europe and ongoing inflation fears.
US Fed chair, Jerome Powell, used multiple speaking opportunities in March to shrug off concerns about the pace of the increase in longer-term US interest rates. The US 10-year Treasury yield increased significantly in the first quarter. Prices for commodities also rose sharply in the first quarter as the global recovery boosted demand. US job growth accelerated in March and the unemployment rate fell to 6.0%, from 6.2% in February.
The International Monetary Fund increased Global GDP estimates from 5.5% to 6% for this year, and from 4.2% to 4.4% for 2022. They estimate growth of 5.1% for advanced economies this year, while developing economies are expected to expand by 5.7%. Global economic data released in March largely surprised to the upside.
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