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

Debt data disclosures, SA fiscal buffer evaporating

Reports suggesting that many developing countries, including some in Africa, have larger external debts to China than officially reported reinforce concerns about a lack of transparency. At the very least, debt restructuring talks will get tougher. Meanwhile, in South Africa, the public finances have almost certainly taken a turn for the worse since the rosy outturn in the second quarter.

1 October 2021

Good and bad news from SA, Tanzania gets IMF support

Data this week showed that South Africa recorded robust GDP growth in Q2, but there was little time to celebrate as a slump in manufacturing output in July has raised the risk of a contraction over Q3. Elsewhere, Tanzania secured financing from the IMF this in a further sign of good start by the new president, Samia Suluhu Hassan. Finally, the sharp fall in the birr this year drove Ethiopia’s inflation rate to 30.4% y/y in August. Currency weakness and the growing threat of an all-out civil war have increased the risk of a sovereign default.
CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.

10 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.

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.

Tanzania: Growth set to slow

After picking up a touch this year, we think that economic growth in Tanzania will slow in 2020 and in 2021. President John Magufuli’s increasingly erratic policymaking will deter investment while external conditions will cause the country’s terms of trade to worsen.

15 August 2019

SARB hikes rates, Tanzanian nuts, Ethiopian reforms

Hawkish rhetoric from South Africa’s MPC suggests that another rate hike is likely in Q1. But the divided MPC’s appetite for further tightening will dissipate if – as we expect – inflation eases in mid-2019. Tanzania’s president continued his run of erratic policy announcements this week, while Ethiopia’s reformist premier took a big step towards opening up the political system.

Cote d’Ivoire & Tanzania: Peaceful elections a welcome sign

Peaceful elections held earlier this month in Cote d’Ivoire and Tanzania were welcome signs of improving institutions in both countries. While final results haven’t been announced yet, the fact that Cote d’Ivoire’s vote passed peacefully is a particularly important turnaround – the 2010 election sparked a brutal civil conflict. Although the incumbent CCM, which has ruled Tanzania’s since independence, probably won again, this month’s vote was the country’s most competitive ever. This year has already seen Nigeria’s first ever democratic transfer of power between different parties, and these latest polls add to a sense that, while Sub- Saharan Africa is facing an extremely difficult economic adjustment due to low commodity prices, political institutions do seem to be strengthening in many countries. More competitive political systems in the region may eventually result in better governance, improving long term growth prospects. The trend is, however, far from uniform. October also saw the Republic of the Congo’s long-ruling president hold a widely-boycotted plebiscite to extend his rule. The presidents of the Democratic Republic of the Congo and Rwanda also look set to extend their own terms in office next year, rather than step down as their constitutions currently require.

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