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Africa Economics Weekly

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 Economics Weekly

Tighter global financing conditions, Zambia’s debt

African financial markets are not insulated from the tightening of global external financing conditions, and recent currency weakness and rising sovereign bond yields in the region will only add to already-strained balance sheets in some economies. Ghana, Kenya and Ethiopia seem most vulnerable. In Zambia, while debt restructuring negotiations finally kicked off this week, we suspect that getting a deal over the line will take some time. That and the decision to extend a subsidy scheme are likely to hold up the final agreement on the country’s IMF programme. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now

17 June 2022

Africa Economics Weekly

Uninspiring politics in Nigeria, SA’s external position

Nigeria’s two main political parties have selected presidential contenders, setting the scene for a long campaign season ahead of elections in early 2023. Lots can happen until then, but with more market-friendly candidates out of the race, upside risks for the economic outlook are now slimmer. Elsewhere, we think that South Africa’s current account surplus in Q1 marked a turning point with the external position likely to deteriorate over the remainder of the year and the rand set to come under pressure.

10 June 2022
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Africa Economics Weekly

Fuel levy in South Africa, primary season in Nigeria

The extension of a fuel levy cut in South Africa will help to contain fuel price pressures in the near-term, but the extra fiscal costs come at the same time that it looks like the government will have to concede ground to unions in public sector wage talks. Meanwhile in Nigeria, the main opposition party selected its presidential contender for the 2023 elections and, with the ruling party set to take its pick next week, election season will kick off in earnest. We are sending this Weekly two days earlier than usual because Capital Economics’ London office is closed on 2nd – 3rd June for the Queen’s Platinum Jubilee celebrations.

Africa Economics Weekly

Nigeria’s economy and central bank chief under pressure

The rumours (subsequently denied) that Nigeria’s central bank governor had been sacked after delivering an interest rate hike raise further questions over the CBN’s independence. Even if the governor were to go, the country’s FX restrictions are likely to remain in place, at least until next year’s elections. In the meantime, the economy’s woes are becoming increasingly prominent. Low oil output is weighing on GDP growth and preventing Nigeria from taking advantage of high oil prices.

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.

Africa Economics Weekly

Monetary politics in Nigeria, Ghana’s efforts to curb debt

Nigerian President Buhari’s instruction that current government officials planning to run for the country’s highest office should resign will probably leave the central bank without a governor, but this is unlikely to lead to meaningful change in monetary policy before the elections early next year. Elsewhere, the latest jump in Ghana’s inflation rate will up the pressure on the central bank to raise interest rates further. Yet, officials remain steadfast not to turn to the IMF amid rising investor concerns about the country’s debt position. EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

Africa Economics Weekly

SA recovery falters, wage talks, Kenya’s soft start to 2022

Recent flooding in a key province and warnings this week that power cuts could reach unprecedented levels are the latest in a long list of blows to South Africa’s economy that have repeatedly stifled any emerging growth momentum. Meanwhile, South African trade unions’ opening offer in public sector wage negotiations will almost certainly be rebuffed, but we expect that the government will ultimately concede some ground. Elsewhere, Kenya’s statistics office confirmed this week that its economy expanded by 7.5% last year but more timely indicators point to weakness so far this year.
China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

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