South Africa says US polls may result in financial uncertainty

The South African Reserve Bank has said that the recent US presidential polls presented an uncertain future in the financial markets with a possible policy shift.

Johannesburg, Nov 25: The South African Reserve Bank has said that the recent US presidential polls presented an uncertain future in the financial markets with a possible policy shift.

Governor of the South African Reserve Bank (SARB), Lesetja Kganyago, said the election build on the uncertainty caused by Britain's exit from the European Union (EU), Xinhua news reported on Friday.

"The global outlook has become increasingly uncertain. While the new policy direction in the US is still unclear, the markets have interpreted the outcome as being positive for US growth in the short run," he said.

Kganyago said the commitments to tax cuts and higher fiscal spending on infrastructure are positive things expected from the Donald Trump administration.

This would result in higher growth and inflation, particularly against the backdrop of an increasingly tight labour market.

He, however, said the timing and extent of the expenditure boost are highly uncertain at this stage.

While the increase in infrastructure could be positive for the commodity prizes like gold and others, there are possible negative effects on the emerging markets.

"Other aspects of the possible new policy direction are likely to have an adverse effect on emerging markets...These include a possible more aggressive tightening of the US monetary policy in response to higher inflation and growth, which could also reduce the multiplier effect of the fiscal expansion," Kganyago said.

During his campaign, Trump emphasised that he would cut foreign spending by withdrawing soldiers abroad and concentrate on domestic growth.

Kganyago said there has been a recent reversal of capital flows to emerging markets from the US, coupled with an increase in the US bond yields. This will negatively affect the emerging markets.

IANS