SA rand, third wave risks, power problems

The South African rand has been a star performer amongst major EM currencies so far this year, but we think that it will suffer one of the biggest losses against the US dollar by year-end. Meanwhile, South Africa is suffering from a renewed rise in COVID-19 cases and another slow response from policymakers would risk renewed strains on the health system and the need for tighter restrictions, keeping activity depressed. Adding to the downside risks facing the economy, plans to secure emergency power are at risk of being derailed. Poor rains mean that power problems are also afflicting Côte d’Ivoire and Ghana and disrupting the processing of key cocoa exports.
Jason Tuvey Senior Emerging Markets Economist
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Africa Data Response

South Africa Manufacturing PMI (Jul.)

South Africa’s manufacturing PMI tanked in July as activity was hit by violent unrest and tighter virus containment measures. And while activity is likely to rebound this month, South Africa’s recovery is likely to continue to lag behind other major EMs.

2 August 2021

Africa Economics Weekly

South Africa’s fiscal tightrope, FX reshuffling in Nigeria

"Post-unrest relief measures announced by the South African authorities will probably go some way to offset the blow to the economy. The government expects to be able to stick to its fiscal consolidation plan, but the path to do so has narrowed again. Meanwhile in Nigeria, the central bank’s move this week to shake up foreign exchange provision in the country risks hurting economic activity and exacerbating inflationary pressures."

30 July 2021

Africa Chart Book

Delta threat building

The highly contagious Delta variant of COVID-19 seems to be dominant now across much of Sub-Saharan Africa and is driving new waves in many of the large economies. South Africa appears to be over the worst of its latest outbreak, although it now has to contend with the legacy of violence and unrest earlier this month. Elsewhere, cases are rising quickly and could dampen recoveries. Extremely low vaccine coverage makes the region particularly vulnerable to this variant and potential future ones. Even in South Africa, where the rollout is quick by regional standards, at the current pace it would take a year for vaccine coverage to reach the levels offering protection against new variants seen in DMs.

29 July 2021

More from Jason Tuvey

Emerging Europe Economics Update

Turkey’s inflation risks mount, CBRT to delay rate cuts

Turkish inflation hit a two-year high in June and recent domestic energy price hikes will cause it to rise even further over the next couple of months. High inflation and signs of a quick recovery from May’s lockdown mean that the central bank will probably delay the start of its easing cycle until later this year. We now expect the one-week repo rate to be lowered to 17.00% by end-2021 (previously 14.00%).

7 July 2021

Emerging Europe Data Response

Turkey Consumer Prices (Jun.)

The fresh rise in Turkey’s headline inflation rate to 17.5% y/y in June, coupled with signs of a strong rebound in activity after May’s three-week lockdown, means that an interest rate cut in the next couple of months is increasingly unlikely. An easing cycle is now more likely to commence later this year when inflation looks set to fall sharply.

5 July 2021

Emerging Europe Economics Weekly

Turkey dollarisation, Ukraine-IMF, Russia & Poland rates

Turkey’s central bank took steps this week to tackle deposit dollarisation in the banking sector, although these efforts will fail to make headway in the absence of a stronger commitment to rein in high inflation. Meanwhile, Ukraine’s government still has work to do to secure the next tranche of its IMF loan, but the economy can muddle through without help from the Fund for some time. Finally, other developments this week suggest that Poland’s central bank may stick to its recent dovish rhetoric while Russia looks like it could accelerate the pace of monetary tightening.

2 July 2021
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