Rand hits new low on bleak economic outlook

South Africa‘s rand fell to a new all-time low against the dollar on Thursday, as analysts predicted a steep economic contraction and large budget deficit because of the global coronavirus pandemic.

At 1545 GMT, the rand was around around 2% weaker at R18.60 per dollar, after earlier touching a new low of R18.65.

South Africa has the most confirmed coronavirus cases in sub-Saharan Africa, at 1,380.

It is heavily exposed to the disruption caused by the virus as a major exporter of commodities and has imposed some of the toughest restrictions on the continent, including a 21-day lockdown that began on Friday.

The toll on the economy, which fell into recession late last year, has already shown up in preliminary tax numbers.

BNP Paribas economist Jeffrey Schultz said in a research note that he had revised down his gross domestic product (GDP) forecast to a contraction of 4.0% this year.

He now expects a 9.1% of GDP budget deficit in the 2020/21 fiscal year that will compound worries over the country’s public finances, which have been stretched by repeated bailouts to ailing state firms including power utility Eskom and South African Airways.

The yield on the government bond due in 2030 rose 3 basis points to 11.190%.

On the Johannesburg Stock Exchange, strong gains for gold shares helped lift the main indices by more than 3%.

Gold Fields was up 10.76% and AngloGold Ashanti 11.02% higher, supported by a higher spot gold price .

Shares in telecom firm MTN Group rose 12.59%, helped by signs Saudi Arabia and Russia may be ready to cooperate to stabilise the oil market after a slump in prices. MTN operates in a number of oil-producing countries such as Nigeria and Iran.