Entries for 'Sub-Saharan Africa'

The SARB Governor continues to speak about the merits of lowering the inflation target. We think a policy announcement could come early next year, as the government continues to deliberate. There is likely to be a glide path to a lower point target with a tolerance band.

While economic indicators suggest that full-year 2024 growth will fall below 1%, the foundations have been laid for a higher medium-term growth trajectory. Lower inflation and interest rates and higher fixed investment will be core drivers of growth.

Kenya’s public finances are at a turning point and if it is not careful, it could put strain on the BoP. Its fiscal outlook has come into question following the withdrawal of the 2024 Revenue Bill. The government plans to cut development spending instead of raising new revenue.

Tanzania’s economy is poised for strong economic growth over the medium-term, supported by fixed investment spending and service sector growth. Improved trade and tourism receipts will narrow the current account deficit in ‘24. The extended IMF ECF program remains critical for fiscal consolidation.

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.