The Economist has updated its Big Mac Index for 2023, showing that the rand is still undervalued against the US dollar – but it’s trading closer to its ‘real’ value than in 2022.
The Big Mac is selected for comparison as the popular fast-food meal is widely available and remains fairly consistent in pricing; however, it is by no means an exact measure. The difference between this and the actual exchange rate, R17.21, suggests the South African rand is 45.9% undervalued, the 11th most undervalued currency in the analysis.
Experts have argued that because of PPP, the cost to produce a Big Mac is typically cheaper in poorer countries, thus skewing the data. In South Africa’s case, the rand is under pressure on several key fronts: the unit is at the mercy of global market movements, particularly that of the US dollar – meanwhile, local conditions, such as the ongoing energy crisis and persistent load shedding, weigh heavily on sentiment.
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