South Africa’s economy is projected to grow by 4.9% this year but growth will slow down to 4.5% next year, this according to the National Treasury. The forecasted drop in next years growth is largely due to slower growth in developed markets across the world as a result of the subprime mortgage crisis in the USA together with a slower growth in domestic consumption due to the ever increasing interest rates in South Africa. Although, The Treasury predicts that growth will rise to 5.3% in 2010, the next two years will see slow downs in growth.

Finance Minister, Trevor Manuel, also came out yesterday and said that the outlook for the Rand was less positive now than it looked in February this year. He attributes this to: financial crises in developed markets, global imbalances, high food and oil prices internationally and slowing growth in the US and other developed countries. South Africa has built up $30bn in reserves which should bode well for the future as this would result in a more stable currency.

The Rand is currently trading at around R6.50 / US$ from R6.98 / US$ in the beginning of a year. This shows that the Rand has appreciated by more than 7% this year as opposed to a 10% depreciation in 2006. Exporters have generally not been happy with the ’strong’ Rand as they would be getting less Rand for their exports. When the Finance Minister was asked about the impact of the Rand on exporters he said that he was not concerned about it, saying that the Rand was trading inline with other commodity currencies across the world.

With a projected slow down in the economies growth next year where will that leave the Rand trading compared to other world currencies?

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