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 Economics Weekly

FX orthodoxy in Nigeria? Strikes in SA, Ethiopia’s conflict

Comments by Nigeria’s vice president endorsing a more market-based exchange rate regime reflect growing concern about the distortionary effects of the current FX system, but there is no evidence that key officials backing the existing currency arrangements are also shifting tack. In South Africa, ongoing industrial action in the steel industry will probably dampen manufacturing output in Q4, in another hit to the recovery in the sector and the wider economy. Finally, escalating tensions in Ethiopia raise the spectre of more severe strains in the balance of payments.

15 October 2021

Africa Data Response

Nigeria Consumer Prices (Sep.)

The drop in the headline inflation rate in Nigeria, to 16.6% y/y in September, will ease pressure on the central bank to raise rates and allow policymakers to focus on supporting the economic recovery.

15 October 2021

Africa Data Response

South Africa Activity Data (Aug.)

South Africa’s hard activity data for August point to a bumpy recovery following a large hit to the economy in July, adding to reasons to think that interest rates are unlikely to be raised imminently.

13 October 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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