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Africa

Botswana

Debt problems building

Sub-Saharan Africa’s recovery is likely to remain slow going and our growth forecasts are generally below the consensus. While spillovers from the war in Ukraine will boost a handful of economies – notably Angola and Nigeria – in others, the fallout will cause economic pain. High inflation is likely to prompt monetary policymakers across the region to hike interest rates, although we think South Africa’s central bank will do so more gradually than most currently expect. Meanwhile, public debt problems will grow. Risks are highest in Ethiopia and Ghana, while South Africa faces a slow-burning problem. EM Drop-In (5th May, 10:00 EDT/15:00 BST): Join Shilan Shah for our latest monthly session on the big macro and markets stories in EMs. This month, Shilan and the team will be talking Russian gas, FX weakness and surging food prices. Register now

4 May 2022

War in Ukraine: a varied impact across Africa

Spillovers from the war in Ukraine will have a varied impact across Sub-Saharan Africa. Large oil producers such as Nigeria and Angola are benefitting from the surge in global oil prices but, for the rest of the region, it is worsening their terms of trade. That is a cause for concern for countries already running large current account deficits, such as Kenya, particularly given that external financing conditions have tightened at the same time. The Ghanaian cedi has been a notable casualty among African currencies, further fuelling concerns about its fragile public finances. Meanwhile, with higher commodity prices adding to inflation pressures and the Fed turning more hawkish, central banks may tighten monetary policy more quickly.

31 March 2022

Assessing public debt risks in Africa

In this Update, we roll out our sovereign debt heat map that provides a snapshot of debt risks across Sub-Saharan Africa. The pandemic has increased debt burdens across the continent and, with elections on the horizon in many places, governments are unlikely to push through the austerity needed to stabilise debt. While the rise in commodity prices caused by the war in Ukraine is a positive for some (e.g. Angola), tighter external financing conditions pose significant risks for others (e.g. Ghana). Long Run Outlook Drop-In (23 March, 11:00 EDT/15:00 GMT): What will be the lasting impacts of the war in Ukraine? What legacies will the pandemic leave? What does a future of higher inflation mean for economies and markets? Neil Shearing hosts this special discussion with senior economists about the long-term investing outlook on Wednesday. Register here.

21 March 2022
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Region to lag behind as debt risks mount

Sub-Saharan Africa’s economic recovery from the pandemic is likely to remain one of the weakest of any region over 2022-23 and our GDP growth forecasts are generally below the consensus. The latest virus waves already seem to be ebbing, but low vaccination rates will keep much of the region vulnerable to possible future outbreaks. In the meantime, lower commodity prices and fiscal austerity will hold back growth. Despite tight fiscal policy, public debt risks will continue to mount in much of the region.

Omicron shines spotlight on low vaccine coverage

The emergence of the Omicron strain of COVID-19 reinforces the need to boost vaccine coverage in Sub-Saharan Africa from current low levels. Most countries have administered at least one vaccine dose to less than 20% of their populations. The South African authorities’ initial response to the ‘Omicron threat’ was to urge the take-up of vaccines, rather than tightening containment measures. And so long as vaccine coverage is low, the risk of intermittent curbs on activity to relieve strains in health care sectors will linger with future virus waves and variants. Achieving such vaccine coverage will probably take some time even as Africa’s vaccine supplies – including from China and India – look set to increase over the coming quarters.

The Omicron variant and the threat to EMs

There’s a lot that we don’t know about the new Omicron variant. But if it proves more virulent, the economic fallout would probably be largest in EMs in parts of Africa and South and South East Asia that have lower vaccination rates, more limited fiscal space and/or larger tourism sectors. The new variant may also temper the pace of tightening cycles in parts of the emerging world. In view of the wider interest, we are also sending this Emerging Markets Economics Update to clients of all our Emerging Markets services.

Hope on vaccines, but still a long way to go

COVID-19 vaccine coverage remains pitifully low across much of Sub-Saharan Africa, with less than 10% of populations having received at least a first dose in most countries. But there are signs that things may be slowly turning a corner. The rate of vaccination has picked up in recent weeks and there are growing hopes that this trend will continue as the supply of vaccines to the continent improves. That said, there is still a long way to go to reach the high vaccine coverage achieved in other parts of the world. What’s more, even as supply improves, other hurdles such as logistical challenges and vaccine hesitancy may still hinder progress. In the meantime, the region will remain vulnerable to fresh virus outbreaks and the threat of tighter restrictions will continue to cast a cloud over the economic outlook.

Headwinds beyond vaccine woes intensifying

Extremely low vaccine coverage continues to cast a dark cloud over recovery prospects in Sub-Saharan Africa and this will be compounded by deteriorations in the terms of trade and tighter fiscal policy. As a result, rebounds in most economies will lag behind other EMs. Sovereign debt risks look acute in Ethiopia and are growing in Ghana, while South Africa faces a slow-burning problem.

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