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Omicron lessons from South Africa

South Africa’s experience with Omicron so far offers tentative hope to other economies since it hasn’t pushed up the incidence of very severe illness in the same way that the Delta wave did. The economic impact will depend on how policymakers respond, which will vary across countries. In South Africa’s case, the government has avoided tighter restrictions and, for now, activity doesn’t seem to have been affected. Instead, the focus has been on encouraging people to get vaccinated, but take up hasn’t picked up by nearly as much as the government probably hoped for. In light of the broad interest in this issue, we are making this report available to all clients.
William Jackson Chief Emerging Markets Economist
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Africa Data Response

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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

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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.

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More from William Jackson

Latin America Economics Weekly

Brazil’s inflation expectations, commodity exports

Brazil's central bank made it clear at its meeting this week that it will continue to hike rates aggressively until inflation expectations come down which, based on past form, will occur when actual inflation drops back. We expect that this will happen around Q2 next year. Otherwise, data this week showed a strong rise in Chinese commodities imports which bodes well for Latin American producers, but we doubt that the external backdrop will remain favourable over the coming quarters.

10 December 2021

Emerging Markets Economics Chart Book

Omicron not yet swaying EM central banks

The latest EM central bank meetings confirmed that policymakers in Emerging Europe and Latin America are still focused on high and rising inflation, rather than any downside risk to the economic outlook from the Omicron variant. Central banks in Brazil, Hungary, Poland and Peru tightened monetary policy aggressively this week, and we expect that policymakers in Russia, Chile and Colombia will follow suit next week. Lower inflation in much Asia gives policymakers there more leeway. If anything, the Omicron variant reinforces our view that interest rates in most of Asia will stay low for longer than most currently anticipate.

10 December 2021

Latin America Data Response

Brazil IPCA (Nov.)

The slightly softer-than-expected Brazilian inflation figure, of 10.7% y/y, isn’t going to stop Copom from hiking the Selic rate by another 150bp (to 10.75%) when it meets in early February. But it does provide a sign that inflation is stabilising a bit sooner than most analysts had expected, and supports our view that the tightening cycle won’t have much further to run after the February meeting.

10 December 2021
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