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Narrower deficit increases chance of longer easing cycle Weak domestic demand in South Africa has narrowed the country’s current account deficit, which should provide some support to the rand and allow the SARB more space to loosen policy. We expect that …
5th March 2020
The sharp fall in South Africa’s GDP in Q4 not only marked a technical recession, but also set up a very weak starting point for 2020. And downside risks are growing with the spread of the coronavirus. Figures released earlier today showed that South …
3rd March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
Economy faltering in early 2020 While weak PMIs elsewhere in the EM world were partially due to spill over effects from the coronavirus, the sharp fall in the South African survey largely reflects domestic weaknesses. We suspect that the economy …
South Africa’s budget: an uphill fight Finance Minister Tito Mboweni’s budget speech this week acknowledged the scale of the economic challenges facing South Africa, but we think that the minister’s outlook is still too rosy . The government’s increased …
28th February 2020
Recent news added to our general sense of pessimism about most African economies in 2020. While the region has yet to report any cases of the new coronavirus, falling commodity prices are already dealing a blow to exporters of oil and other industrial …
27th February 2020
The government is trying to balance weak revenue with increased interest and SOE spending by cutting wages and programme costs, which will prove politically difficult. The weakening fiscal position and rising debt burden have further increased the risk of …
26th February 2020
Economy picks up, but remains weak Growth in Nigeria ticked up a notch in Q4, but there is still no sign of a broad-based economic recovery. We expect that the authorities will continue to enact unconventional stimulus policies later this year. National …
24th February 2020
South Africa: Budget will be painful Finance Minister Tito Mboweni’s 26 th February budget speech will have to include tax rises and spending cuts as the government struggles to get a grip on its large deficit while providing financial aid to failing …
21st February 2020
Inflation picked up, only one more cut likely South African inflation jumped to the 4.5% y/y midpoint of policymakers’ target range in January, which strengthens our view that the current easing cycle will end after just one more cut. Figures released …
19th February 2020
Inflation continues to tick up The further rise in Nigerian inflation in January, to 12.1% y/y, suggests that border closures have continued to drive up food prices. This will limit the central bank’s scope to lower interest rates to support the economy, …
18th February 2020
South Africa: Ramaphosa doesn’t rock the boat President Cyril Ramaphosa used Thursday’s State of the Nation Address to outline his plans to reform South Africa’s ailing power sector, but his focus on building consensus among key social actors suggest that …
14th February 2020
President Cyril Ramaphosa’s State of the Nation Address contained a few promising announcements, relating to independent power firms. But his continued stress on the need for consensus strengthened our view that he won’t take the bold steps needed to …
We think that a recent string of on-target inflation data and a less accommodating external environment will delay further interest rate cuts in Ghana. But monetary loosening will probably resume in 2021. Data released this week showed that headline …
13th February 2020
December’s misleadingly strong mining figures shouldn’t distract from evidence that GDP probably contracted in Q4, tipping the country into a recession and creating a very weak starting point for 2020. Figures released today showed that mining output …
Power cuts batter manufacturing sector The South African manufacturing sector’s terrible performance in December has set up a weak start to 2020. And, given that power cuts lasted into January, problems in the sector probably continued. Widespread power …
11th February 2020
Coronavirus: No infections won’t mean no cost Despite the lack of confirmed cases in the region, African economies are probably already feeling the indirect effects of the coronavirus outbreak. African economies are, at least, unlikely to be directly …
7th February 2020
After a severe drought in 2019, Kenya is now facing the worst desert locust outbreak in 70 years. The impact on livelihoods could be devastating, but the economy-wide cost is likely to be limited. Locust outbreaks can inflict significant economic damage …
PMI suggests weakness continued in the New Year South Africa’s manufacturing PMI dropped further in January, adding to the evidence that the economy remained very weak at the start of 2020. Figures released earlier today showed that South Africa’s …
3rd February 2020
Africa: CE pessimism about the usual suspects We published our quarterly Africa Outlook this week, in which we laid out our characteristically below-consensus forecasts for the region. But a look behind the headline number shows that we’re actually pretty …
31st January 2020
African central banks had a busy month in January. Policymakers in South Africa and Kenya surprised the markets (and us) by cutting their key rates by 25bp. We expect that both countries’ central banks will make one further cut, but that rising inflation …
Overview – Economic growth in Africa is likely to come in at just 3% this year, as the slump that began in 2015 drags on. The limit on regional growth will, again, come from South Africa where hopes for a meaningful rebound this year look too optimistic. …
30th January 2020
Nigeria: CBN tweaks policy, but holds the course Policymakers in Abuja kept their key interest rate on hold today, but made a technical adjustment to put a floor under falling interbank rates. Increasing the Cash Reserve Ratio from 22.5% to 27.5% will …
24th January 2020
Inflation picked up, easing cycle will be short South African inflation strengthened in December, and we expect that it will continue to do so in Q1, bringing the current monetary easing cycle to an end after just one more 25bp rate cut. Figures released …
22nd January 2020
South Africa: Recession warnings flashing The latest activity data suggest that the economy strengthened a touch in November, with output probably rising by 0.3% q/q saar. Given that widespread power cuts almost certainly disrupted output in December, we …
17th January 2020
South African policymakers surprised the markets by cutting the repo rate, but with inflation set to rise there is limited room for further easing. We expect just one further 25bp cut. Policymakers at the South African Reserve Bank unanimously voted to …
16th January 2020
Strong November retail sales figures suggest that South Africa’s economy gained ground in the middle of Q4. Given power cuts in December, however, we expect that output still fell over the quarter as a whole. Activity figures released today showed that …
South Africa: Latest figures point to Q4 decline Surveys and activity data released this week added to the evidence that South Africa’s economy contracted in the fourth quarter, which would have tipped the country into another technical recession. …
10th January 2020
South Africa’s manufacturing sector was struggling even before December’s power cuts, so production almost certainly fell in Q4. Given weakness in other sectors, we think that South Africa slipped into another technical recession last quarter. Figures …
9th January 2020
PMI suggests weakness continued in December South Africa’s manufacturing PMI edged lower in December, adding to the evidence that the economy remained weak in Q4 and raising the prospect of another technical recession. Figures released earlier today …
8th January 2020
Rebranding the West African CFA franc as the “Eco” will have little economic effect; the new currency seems likely to be governed by the same FX regime as its controversial predecessor. The move may, however, scupper plans for a region-wide currency …
7th January 2020
South Africa: growing trade surplus not so positive The improvement in South Africa’s trade surplus in November was not the rare piece of positive news it first appeared and is merely a reflection of the weakness of the economy. The rise in the trade …
3rd January 2020
Nigeria: Trade restrictions hurt consumers Nigerian inflation jumped to 11.9% y/y in November, strengthening our view that recent border closures have pushed up prices. This will delay rate cuts until late next year. (See Chart 1.) Chart 1: Nigeria …
20th December 2019
To mark the new year, our various teams have published a series of key calls notes setting out what to watch for in 2020. This Update wraps up some of our key views for Sub-Saharan Africa. While growth in Sub-Saharan Africa will almost certainly …
19th December 2019
The final round of South African data released this year supported our view that the economy faltered in recent months. Output fell by 0.6% q/q saar in Q3, and the latest figures suggest that the economy may have entered another technical recession in Q4. …
18th December 2019
Inflation on the rise, rates to remain on hold Nigerian inflation picked up again in November, driven mostly by rising food inflation. We think that the headline rate will continue to climb over the coming months and that policymakers will leave their key …
17th December 2019
South Africa: Recession risks rising Activity data released this week showed that South Africa’s economy continued to contract in October , raising the prospect that the country has entered a technical recession. (See Chart 1.). Chart 1: GDP & CE GDP …
13th December 2019
Activity data suggest that South Africa’s economy continued to contract in October . Given the escalation of power sector problems more recently, it’s likely that the economy has now entered recession. Activity figures released today showed that mining …
12th December 2019
Inflation weak, but will pick up in 2020 South African inflation stayed very weak in November, but petrol prices will push up the headline rate in December. Despite a flagging economy, we doubt that the SARB will cut its key policy rate anytime soon. …
11th December 2019
Given the government’s tendency to overspend in election years, we think that Ghana’s budget deficit will rise to about 8% of GDP next year. This will heighten investor concerns and put pressure on the currency and sovereign bonds. After narrowing as part …
10th December 2019
Severe power cuts in will weigh on the economy in Q4, and raise the serious risk of another technical recession. Even if the economy does manage to return to growth this quarter, recent weakness has set the stage for a disappointing 2020. Our …
South Africa: Weak Q3, and trouble ahead Data released this week showed that South Africa’s economy contracted again in the third quarter, and more timely figures suggest that conditions remained bleak in Q4 - raising the spectre of another recession. The …
6th December 2019
The sharp contraction in South African output in Q3 strengthened our view that trend growth in the country is flagging, and that GDP will only rise by a meagre 0.5% in 2020. Figures released today showed that South African GDP contracted by 0.6% in Q3 at …
3rd December 2019
PMI points to continued weakness South Africa’s manufacturing PMI slipped again in November, adding to the evidence that the economy remained weak in Q4. Figures released earlier today showed that South Africa’s manufacturing PMI fell from 48.1 in October …
2nd December 2019
Nigeria: CBN holds rate, toes government line The governor of the Central Bank of Nigeria (CBN) used this week’s MPC statement to heartily defend the government’s latest round of protectionist policies, which will add to the impression that the bank is …
29th November 2019
Figures released over the past month painted a very downbeat picture of economic conditions in Africa’s two largest economies. Growth in Nigeria did, admittedly, pick up a touch in Q3. But activity remained very weak by past standards, with GDP rising by …
28th November 2019
Governor keeps faith with unconventional policy Nigerian policymakers left their key rate unchanged today, preferring to use unconventional policy rather than rate cuts to boost the economy. We suspect that most of these measures will fail, prompting a …
26th November 2019
Nigeria: New data underlines struggling economy Economic growth in Nigeria remained very weak in Q3 , with the economy again failing to escape the slow-growth trajectory on which it has been stuck since 2017. (See Chart 1.) Chart 1: Nigeria GDP (% y/y) …
22nd November 2019
Economy continues to splutter along Nigeria’s non-oil economy strengthened a touch in Q3, but headline growth remained very weak. Without significant policy change, we expect that the economy will continue to struggle in 2020. National accounts figures …
South African policymakers left their key rate on hold at 6.50% today, and we expect that it will remain on hold going into 2020. But we do admit that the risk of a cut in the middle of next year has increased. South African policymakers’ decision to …
21st November 2019
