International background and outlook
The outlook for the global economy remains uncertain as the spread of Covid-19 continues. Most economies are expected to show strong recoveries from the plunge in the second quarter, as activity is gradually restored. However, the trajectory beyond the third quarter is generally expected to be slow.
Domestic review and prospects
The outlook for the domestic economy also remains bleak. Lockdown restrictions have been eased as Covid-19 infection rates accelerate. Underlying conditions are likely to improve in the second half of the year, but the recovery is expected to be too timid and too late to prevent a sharp contraction in GDP over calendar 2020. On the upside, some stability returned to the domestic financial markets. The rand pulled back and inflation moderated to well below the 4.5% midpoint of the Reserve Bank’s inflation targeting range, creating space for a further 25-basis-point cut in interest rate in July. Interest rates are now expected to remain steady for an extended period.
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