South African GDP fell in the last quarter, what is the next outcome?

The stats are out, This Tuesday, Statics South Africa announced that the GDP for the country fell by 0.7 percent in the last quarter of the year. This is due to a myriad of issues, however the most common was the inflation caused by oil supply shortages and power outages which slowed down economic production. This announcement serves as a golden key for us traders as with this information we can find ZAR shorting opportunities and earn profits.

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Why did the South African GDP fall in the last quarter？

South Africa was somewhat dependent on the steady supply of oil that Russia supported. However, the Russia and Ukraine war has had a massive impact on that supply chain which has caused cascading problems all over the world and led to inflation. South Africa was not the only country that experienced this issue, as the United State and Europe are also fighting the same beast. This inflation was exasperated by the fact that for the majority of the second quarter South Africa had to resort to load shedding as South Africas energy supply was unable to keep up with demand with its old infrastructure.

This all led to South Africans facing higher costs of living, and reduced production which in turn affected the GDP. There have been a number of things that have been implicated by the government in order to fight inflation. This cost of fuel has been cut by R2 which may ease citizen's cost of transport, however, Diesel which powers most of the machines which perform the transportation of goods around the country and build infrared did not receive a huge decrease (between 46.34 c a litre and 56.34c a litre.) which may mean the effects of the fuel price cut may not be as successful at reducing inflation. The other issue is that load shedding is still taking place as Eskom recently announced that South Africa will be going back to level two load shedding this coming week.

We can anticipate that this falling GDP trend, at least for the short term, should continue, and so we should be looking for opportunities to short the ZAR. For USDZAR, we should expect to see the pair continue to rise past the 17.3 level and further on.