Entries for 'Sub-Saharan Africa'

Divergent inflation outcomes have placed SSA-4 at different phases of monetary policy stance. Softer inflation in South Africa and Kenya appears to have created room for interest rate cuts. Central banks in Nigeria and Ghana will likely keep rates unchanged into 2025.

Kenya’s outlook has improved on the back of reforms in the context of the IMF program. The recent Eurobond issuance, combined with multilateral support, has improved sentiment. Softer local food prices due to favorable weather supported disinflation, paving the way for rate cuts.

Easing structural bottlenecks will gradually lift output growth in 2024 and 2025. However, “higher for longer” local rates will prevail as a result of sticky inflation. A narrower trade surplus will cause the current account deficit to widen further.

The ANC has been losing popularity due to new parties coming on board and stagnant economic growth. Polls suggest some provinces will form coalitions, but the ANC will likely retain national power. The ANC’s five-year plan hinges largely on a continuation of their current policy priorities.

Policy changes made by President Tinubu last year were deemed necessary, but acceleration and greater cohesion of orthodox policies across the board are needed. Continued devaluations, without appropriate policies, are most likely a fool’s game.

Private consumption expenditure and investment will underpin growth in 2024. But electricity and logistical challenges will continue to weigh on overall sentiment. With the trade surplus likely to narrow, we forecast the C/A deficit to widen in 2024.

President Bola Tinubu took a bold policy stance since assuming office on May 29. Key was the removal of the fuel subsidy and adopting a managed float FX regime. The impact of the two changes will drive inflation but a unified FX is expected to provide medium to longer term macro-economic stability.

Following a controversial election, Nigeria’s new President will be sworn in this month. The new administration faces persistently high fiscal deficits and growing external vulnerabilities. FX-denominated debt has grown substantially, making future debt service requirements daunting.

Electricity shortages and logistical constraints are expected to weigh on growth. The drag will mainly stem from weakening export growth, while fixed investment and consumer spending should remain robust. Food inflation is proving stubbornly high, the greatest upside risk to inflation.

Fiscal consolidation plans were affirmed, but spending targets are too optimistic. A host of tax relief measures were provided to households and businesses, while, the planned takeover of Eskom’s debt by government, offers hope for electricity supply.

Ghana is trying to restructure its local and external debt, … aiming for total debt of 55% of GDP in present value terms. We show present value rati...

Major SSA-4 countries remain vulnerable to the war and global recession. Ghana faces the highest risk of distress amid rising government debt, a depreciating currency, elevated inflation, and declining FX reserves. Softer commodity prices and tight financing conditions will help ease inflation.

Load shedding reached new record highs in recent months, with more to come. High-frequency data already reflect the impact on major sectors of the economy. With electricity problems persisting in July and expected to extend into the fall, overall economic activity likely fell markedly in Q2 and will decline further in Q3. Inflation probably peaked in June, but is expected to remain above 6% over H2, which will keep pressure on the SARB to continue tightening monetary policy.

Global liquidity conditions look set to tighten further, which will force CEEMEA central banks to continue to hike interest rates. Wider macro imbalances also call for tighter policies in some cases. Energy shortfalls could lead to falling output and employment, which would ease demand pressures.

Upside inflation surprises have prompted rate hikes by CEEMEA central banks. We project demand pressures to remain benign despite the ongoing recovery. Even so, markets are pricing further aggressive rate hikes in the coming months. Rising inflation has pushed up long-term bond yields across the region in ‘21H2. Wider term premiums reflect higher credit risk spreads in Turkey and Romania. South African bonds offer the most attractive real returns among CEEMEA bonds.

Nigeria’s exchange rate regime and FX shortages remain among the key issues. The Naira has come under renewed pressure in the parallel market in 2021Q3. We expect the CBN to undertake another step devaluation in the coming months. NDFs indicate that the currency could rise to NGN470/$ by the end of next year.

Inflation is rising due to higher food and energy prices, deglobalization, and supply chain disruptions. In addition, the recent increases in global CPI stem from widespread monetary easing and expansionary fiscal policy. Inflation may exceed central bank targets through 2022 and into 2023. 

The recovery has been uneven, with activity below pre-Covid levels for some sectors. Uncertain economic prospects will likely keep authorities from tightening policies. Losses in recent local elections may lead to delays of critical fiscal adjustment steps. Global factors, including tighter global liquidity conditions, could weigh on the Rand. Abrupt depreciation would force the SARB to tighten earlier than otherwise expected.