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Fiscal positions largely going from worse to bad

Fiscal positions across Sub-Saharan Africa have been a persistent source of concern since the onset of the pandemic – and in some cases, even before. And the commodity price moves resulting from the war in Ukraine will be unfavourable for public finances in most countries. The cost of subsidising fuel, fertiliser or food products is set to rise sharply. On top of this, recent floods in South Africa and a severe drought in East Africa will probably prompt a fiscal response as the authorities step in to support relief and reconstruction efforts. And we think that policymakers will loosen the fiscal purse strings ahead of upcoming elections in Kenya and Angola. The bottom line is that sovereign balance sheets in the region are unlikely to improve as quickly as many hope for.
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Africa Economics Weekly

SA corruption and inflation on display, Ghana’s troubles

The president of South Africa and the ruling ANC are taking the heat as corruption accusations fly. With political bickering likely to grow, the focus on boosting the economy with much-needed reforms is likely to take a backseat. Meanwhile, we think that the latest inflation reading out of South Africa will shift the debate on the scale of further monetary tightening towards 75bp steps. And in Ghana, policymakers appear to be stepping up efforts to support the cedi but at the risk of adding to the economy's pain.

24 June 2022

Africa Data Response

South Africa Consumer Prices (May)

The rise in inflation in South Africa to an above-target 6.5% y/y in May is likely to shift the debate to a choice between a 50bp and a 75bp hike to interest rates at July’s MPC meeting. But inflation continues to be driven by food and energy price effects and, if the headline rate falls sharply over the rest of this year as we expect, interest rates will probably be raised by less than investors anticipate over 2022-24.

22 June 2022

Africa Economics Update

Where next for inflation in South Africa?

Inflation in South Africa has been close to the top of the central bank’s target range in recent months, but the country has avoided the surge in inflation seen across much of the world. And there are reasons to think that the headline rate will drop back sharply by the end of this year. That underpins our view that monetary policy will ultimately be tightened by less than investors currently expect.

21 June 2022

More from Africa Economics Team

Africa Chart Book

War in Ukraine: a varied impact across Africa

Spillovers from the war in Ukraine will have a varied impact across Sub-Saharan Africa. Large oil producers such as Nigeria and Angola are benefitting from the surge in global oil prices but, for the rest of the region, it is worsening their terms of trade. That is a cause for concern for countries already running large current account deficits, such as Kenya, particularly given that external financing conditions have tightened at the same time. The Ghanaian cedi has been a notable casualty among African currencies, further fuelling concerns about its fragile public finances. Meanwhile, with higher commodity prices adding to inflation pressures and the Fed turning more hawkish, central banks may tighten monetary policy more quickly.

31 March 2022

Africa Chart Book

Mixed market reaction in Africa to Russia-Ukraine war

Elevated commodity prices on the back of the Russia-Ukraine crisis will almost certainly add to inflationary pressures across Sub-Saharan Africa. High prices for energy, metals and agricultural products that African countries export seem to have shielded most currencies in the region from sinking amidst a deterioration in risk appetite. But there are some signs of stress. In particular, the Ghanaian cedi has weakened sharply and its sovereign dollar bond spreads have widened, further increasing its public debt vulnerability. EM Drop-In (Thur. 3 March, 15:00 GMT) We’re discussing the impact of Russia-Ukraine on emerging markets in a special 20-minute briefing this Thursday. Registration details.

28 February 2022

Africa Chart Book

Omicron waves in the rear view mirror

Waves of the Omicron variant that spread across the region in December have subsided sharply in recent weeks. And timely survey and mobility data point to a smaller hit from these latest waves compared with previous ones. But the good news will probably be in short supply going forward. Low vaccination rates mean that the region remains vulnerable to future virus waves. What’s more, other headwinds are likely to grow. We expect commodity price moves to turn increasingly unfavourable. And policy support will be thin on the ground with officials pursuing austerity and/or shifting to tighten monetary policy.

31 January 2022
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