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South Africa

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

South Africa Consumer Prices (May)

The rise in inflation in South Africa to an above-target 6.5% y/y in May is likely to shift the debate to a choice between a 50bp and a 75bp hike to interest rates at July’s MPC meeting. But inflation continues to be driven by food and energy price effects and, if the headline rate falls sharply over the rest of this year as we expect, interest rates will probably be raised by less than investors anticipate over 2022-24.

22 June 2022

Where next for inflation in South Africa?

Inflation in South Africa has been close to the top of the central bank’s target range in recent months, but the country has avoided the surge in inflation seen across much of the world. And there are reasons to think that the headline rate will drop back sharply by the end of this year. That underpins our view that monetary policy will ultimately be tightened by less than investors currently expect.

21 June 2022
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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

SA Activity Data (Apr.) & Nigeria Inflation (May)

South Africa’s activity data for April showed that flooding in a key province and renewed power cuts dealt a big blow to industrial sectors, while retail sales held up well. GDP probably still contracted at the start of Q2 and we don’t expect a very strong rebound over the remainder of the year. Elsewhere, the latest jump in Nigerian inflation will keep pressure on the central bank to tighten monetary policy further.

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.

South Africa GDP (Q1)

South Africa posted stronger-than-expected GDP growth of 1.9% q/q in Q1 and, while the economy is unlikely to sustain such a robust performance over the coming quarters, we have revised up our GDP growth forecast for this year to 2.5% (from 2.0%).

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.

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