Africa

Mauritius

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.

27 October 2021

‘BIG’ push in SA, FX distortions in Nigeria, tourism woes

Momentum behind proposals for a basic income grant (BIG) in South Africa appear to be building, suggesting that the authorities are leaning towards providing more fiscal support. Elsewhere, Nigeria’s unorthodox foreign exchange policy seems to be disrupting activity but the chances of policymakers reversing course are very low. Finally, a recent virus wave in the highly-vaccinated island nation of Mauritius has dampened its recovery prospects, but other tourism-dependent economies in Africa will probably fare even worse.

17 September 2021

Pandemic not in the rear-view mirror for some time

The economic damage from the latest COVID-19 waves across Sub-Saharan Africa appears to be smaller compared to previous waves, but low vaccination rates mean that officials will have to keep containment measures in place for longer than elsewhere. This will hold back recoveries and prevent international travellers from returning quickly – a particular problem or countries like Kenya and Namibia.

1 September 2021
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Lagging behind

Vaccination campaigns across Sub-Saharan Africa will continue to struggle, leaving the region vulnerable to renewed virus outbreaks. This, combined with tight fiscal policy, a slow return of tourists and falls in commodity prices means that economic recoveries will lag behind those in other parts of the world. GDP across most of the region is likely to stay well below its pre-crisis path over 2021-23.

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."

Third wave fears grow

Worries about a third wave of COVID-19 in the region have intensified in the past month and the tightening of lockdown measures in some countries – most notably South Africa – will weigh on recoveries. As things stand, surges in cases appear concentrated in countries in the south of the continent; cases have trended down in many of the region’s other large economies (e.g. Nigeria, Ghana and Ethiopia). With vaccine rollouts progressing at a snail’s pace amid low supplies across the region, fresh virus outbreaks will remain a persistent threat to the outlook. The glimmer of hope is that global powers are looking to increase vaccine supplies and, perhaps most importantly, China could be in a position to flood the world with easily-deployable jabs later in the year.

Frontier recovery still on track

The recovery in frontier economies continued over the first half of this year. GDP growth averaged around 2.0% y/y in Q1, twice the rates seen in mid-2016. It would have been stronger still were it not for weakness in the largest frontier market, Saudi Arabia. Cuts to oil production there as part of an OPEC agreement caused the economy to contract by 0.5% y/y. More timely figures suggest that most economies fared well in the second quarter.

Recovery in top economies will drive African rebound

We expect that growth in Sub-Saharan Africa will accelerate over the coming years as the three largest economies in the region – South Africa, Nigeria and Angola – recover from recent recessions. Indeed, our GDP forecasts for these countries in 2017 and 2018 all sit above the consensus. Growth in most other African economies is likely to be relatively stable, although a key exception is Kenya where balance sheet vulnerabilities are mounting and we expect that growth will weaken in 2017. Inflation is set to slow in most countries, meaning that the majority of central banks will lower interest rates over the course of 2017-18. In financial markets, we expect that most currencies will weaken, but at a gentler pace than in 2016.

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