June 25, 2020 / 3:34 PM / 10 days ago

UPDATE 1-South Africa's rand recovers after gloomy budget; stocks fall

(Updates rand, bonds; adds stocks)

JOHANNESBURG, June 25 (Reuters) - South Africa’s rand recovered in afternoon trade on Thursday after sliding earlier following a budget speech that forecast ballooning debt and a higher government deficit.

At 1520 GMT, the rand was 0.7% firmer at 17.2560 per dollar, after hitting a session low of 17.5325 earlier.

Finance Minister Tito Mboweni said on Wednesday the main budget deficit would widen to a record 14.6% of gross domestic product in 2020/21, while public debt would top 80% as the country has borrowed more to plug revenue holes caused by the COVID-19 pandemic.

The downbeat numbers were largely expected by markets, and in some aspects were not as bad as others had forecast.

“The budget surprised the market positively relative to its rather dire expectations,” RMB analyst Nema Ramkhelawan-Bhana said in a note.

“While the revenue shortfall was worse than consensus, the Special Adjustment Budget at least renders the estimate as credible, and the expenditure overrun was lower than anticipated.”

The Johannesburg Stock Exchange slipped following a fall in most emerging market shares as a sharp rise in coronavirus infections took a toll on hopes of a rebound in economies.

The benchmark JSE all-share index fell 0.98% to end the day at 53,914 points, and the top 40 companies index lost 0.92% to close at 49,732 points.

In fixed income, the yield on the 2030 government issue was down 3 basis point to 9.17%. (Reporting by Olivia Kumwenda-Mtambo and Promit Mukherjee Editing by Mark Heinrich)

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