South Africa CPI (May)

South African inflation plunged to 2.1% y/y in May, which probably takes it near the trough. But even as price pressures start to pick up, the headline rate will remain very subdued, allowing the Reserve Bank to continue easing. We think that policymakers will cut the repo rate by a further 75bp, to 3.00%, in the coming months while markets expect only a 25bp cut to 3.50%.
Virag Forizs Emerging Markets Economist
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Africa Economics Weekly

SA’s recovery, all change in Tanzania

The latest hard activity figures suggest that South Africa’s economy started Q2 on a weak footing and, while there were signs of improvement in May, tighter containment measures are likely to have dampened activity this month. One consequence is that we doubt that the Reserve Bank will raise interest rates in the near term. Elsewhere, reports this week that Tanzania is planning to join the Covax facility to secure vaccines add to signs of a broader improvement in policymaking under the new president, and bode well for the country’s growth prospects.

18 June 2021

Africa Data Response

Nigeria Consumer Prices (May)

The second consecutive drop in Nigeria’s headline inflation rate, to 17.9% y/y in May, will probably go some way towards easing policymakers’ recent concerns about high and rising inflation. While we expect inflation to remain well above the central bank’s target for the foreseeable future, the MPC is likely to keep interest rates unchanged over the coming years.

15 June 2021

Africa Economics Focus

The perils of deficit monetisation in Nigeria

Nigeria’s government has turned to the central bank to plug ever larger budget deficits in recent years and policymakers are unlikely to kick their deficit monetisation habit, particularly if the fiscal position worsens next year (as we expect). This will deepen some of Nigeria’s existing economic woes, including high inflation, downward pressure on the naira and weak economic growth.

14 June 2021

More from Virag Forizs

Africa Data Response

South Africa Manufacturing PMI (May)

The rise in South Africa’s manufacturing PMI in May points to an improvement in underlying economic conditions in the sector, but we think that the recovery will  be held back by key headwinds including another virus surge, slow vaccine rollout, power cuts and austerity.

1 June 2021

Africa Economics Weekly

Naira devalued for real, utility deals in Ethiopia & SA

Policymakers in Nigeria appear to have bowed to pressure to devalue the official exchange rate, which will probably improve the public finances and help unlock multilateral financing. That said, a unified and fairly valued naira is unlikely to follow any time soon. Meanwhile, Ethiopia’s ambitious reform agenda seems to be faltering on nearly all fronts. In South Africa, troubled electricity provider Eskom was a source of good news this week for a change, but power cuts are likely to remain a threat to the economic outlook.

28 May 2021

Africa Economics Update

CBN keeps inflation-fighting tools on the shelf

Policymakers in Nigeria kept their benchmark rate on hold at 11.50% at today’s MPC meeting, opting to emphasise the fragile nature of the economic recovery over elevated inflation. With price pressures likely to ease, we think that monetary policy settings will remain unchanged over our forecast horizon.

25 May 2021
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