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External strains abate, but pockets of risk remain

While external risks have subsided across much of Sub-Saharan Africa in recent quarters, pockets of vulnerability remain. External (and, as a result, debt) vulnerabilities look most acute in Ethiopia.
Virag Forizs Emerging Markets Economist
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Africa Data Response

Nigeria GDP (Q1)

Nigeria’s GDP growth slowed to 3.1% y/y in Q1 as robust growth in the non-oil sector was more than offset by a slump in the oil sector. Looser fiscal policy ahead of elections in early 2023 will provide some support to activity going forward, but continued weakness in oil production and disruptions caused by draconian FX policies underpin our below-consensus forecast for growth of 2.3% over 2022 as a whole.

23 May 2022

Africa Economics Weekly

Markets and monetary policy, mounting pressure on naira

Recent investor risk-off sentiment has pushed up sovereign dollar bond yields across Sub-Saharan Africa, fuelling debt risks further, and has put currencies under pressure. Central banks appear to be taking note, with some policymakers turning tightening cycles up a notch. In Nigeria, the recent weakness of the currency on the black market was attributed to election-related spending, but the bigger issue is that downward pressure on the naira stems from the central bank’s unorthodox FX policies.

20 May 2022

Africa Economics Update

Hawks’ majority in SARB to be short-lived

Policymakers in South Africa upped the pace of tightening today, raising the repo rate by 50bp to 4.75%, as concerns about inflation (and inflation expectations in particular) have grown. We don’t think that the hawks will have their way for long though as the tightening cycle is likely to revert to a more gradual pace from the second half of this year.

19 May 2022

More from Virag Forizs

Africa Economics Weekly

SA’s post-election policy direction, Ethiopia crisis spirals

Next week’s Medium Term Budget Policy Statement in South Africa is likely to provide an early signal that the government is scaling back its fiscal consolidation plans following the ruling ANC party’s poor showing in local elections. Elsewhere, the ratcheting-up of Ethiopia’s year-long conflict has pushed the country closer to all-out civil war, with potentially devastating human and economic consequences. At the very least, the threat of a disorderly default is growing.

5 November 2021

Africa Economics Update

SA local elections shrink political capital for austerity

The ANC’s poor showing in South Africa’s local elections this week may strengthen the hand of factions within the party that want to push back against fiscal consolidation. This tilts the risks towards the public debt ratio continuing to rise and, despite the muted market reaction so far, bond yields grinding higher.

3 November 2021

Africa Data Response

South Africa Manufacturing PMI (Oct.)

South Africa’s manufacturing PMI dropped back last month, pointing to a further slowdown in the sector’s already weak recovery. Persistent headwinds will probably keep manufacturing activity subdued.

2 November 2021
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