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PMI picks up, but outlook remains gloomy South Africa’s manufacturing PMI picked up in October but persistent electricity supply problems, tight fiscal and monetary policy and a worsening external backdrop mean that the economic recovery will continue to …
1st November 2022
The past month has brought further signs that economies across Sub-Saharan Africa are in the midst of a slowdown. The latest activity data out of South Africa suggest that, after GDP contracted in Q2, its economy fell into a technical recession in Q3. …
31st October 2022
South Africa’s Medium Term Budget Policy Statement (MTBPS) on Wednesday provided further good news on the state of the public finances, but pressure for public sector wage increases is just one of a number of reasons to think that slippage on the latest …
28th October 2022
Overview – Sub-Saharan Africa has suffered particularly heavily from the pandemic and then spillovers from the war in Ukraine, and the global recession will only add to the headwinds. Taken together with tight fiscal and monetary policy, we hold a …
27th October 2022
South Africa’s Medium-Term Budget Policy Statement published today showed that the government hasn’t (yet) been tempted to spend the windfall from the improvement in the public finances this year. And, by and large, the government expects to stick to its …
26th October 2022
South Africa’s Medium Term Budget Policy Statement (MTBPS), scheduled for Wednesday, is unlikely to provide the drama that the UK’s “mini-Budget” did, but we suspect that the government will tilt fiscal policy in a looser direction even as officials …
21st October 2022
Our Emerging Markets team gave our clients their immediate reaction to the Medium Term Budget Policy Statement (MTBPS) on 26th October. The team addressed key issues, including: Whether the government will spend or save this year’s revenue windfall; If …
20th October 2022
August data increases chances of a technical recession August’s hard activity data out of South Africa and more timely indicators point to a small fall in GDP in Q3, marking a technical recession. Even so, we expect the Reserve Bank to stay focused on …
19th October 2022
Inflation ticking down, but monetary policy to remain hawkish While South Africa’s headline rate edged down to 7.5% y/y in September, the surprising strength of core inflation will push policymakers to deliver another 75bp hike in the benchmark interest …
Inflation nearing peak The rise in Nigeria’s headline inflation rate to a 17-year high of 20.8% y/y last month reinforces our view that policymakers will raise the benchmark rate by a further 100bp, to 16.50%, in November. That will likely mark the end of …
17th October 2022
Nigeria: Buhari administration’s farewell budget The shelf life of Nigeria’s recently presented budget plans is likely to be short with elections due in early-2023 and no guarantee about policy continuity. In a budget speech late last week, …
14th October 2022
Ghana’s economy held up well in the first half of this year but high and rising inflation, combined with monetary and fiscal tightening, means that a sharp slowdown is on the cards. Talks with the IMF over a financing package are underway but this looks …
12th October 2022
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
The bi-annual Monetary Policy Review (MPR) released this week by the South African Reserve Bank (SARB) bolsters our view that the monetary tightening cycle will continue to take on a distinct path to most other EM central banks. In many ways, the SARB has …
7th October 2022
Manufacturing sector struggling to recover from Q2 downturn The drop back in South Africa’s manufacturing PMI in September paints a worrying picture that the sector may have contracted again in Q3. Ongoing electricity supply problems, combined with a …
3rd October 2022
Political considerations ahead of key elections in South Africa and Nigeria are likely to add to reasons to loosen fiscal policy over the coming quarters. Severe power cuts continued in South Africa this week, which past experience shows will have weighed …
30th September 2022
Just like their peers in advanced economies, monetary policymakers across Sub-Saharan Africa have turned more hawkish recently. Central banks in South Africa and Nigeria hiked interest rates aggressively this month. Reining in inflation is clearly the …
29th September 2022
The Central Bank of Nigeria (CBN) upped the pace of its tightening cycle today, increasing the benchmark rate by 150bp, to 15.50%, as officials have become increasingly concerned about sky-high inflation and mounting pressure on the currency. We now think …
27th September 2022
Policy tightening in Ghana: past, present and future Despite the release of better-than-expected Q2 GDP growth figures in Ghana, the economic outlook remains gloomy as policy tightening to address the country’s debt woes will increasingly bite. Data …
23rd September 2022
The latest data out of Nigeria suggest that economic pain is mounting under the weight of troubles in the key oil sector as well as the country’s unorthodox FX policies. With little reprieve on the horizon, we expect GDP growth of 2.3% this year, well …
Today’s decision in South Africa to raise the benchmark rate by 75bp, to 6.25%, despite weakness in the economy suggests that policymakers are prioritising tackling inflation above all else. We think that the tightening cycle is far from over and expect …
22nd September 2022
Inflation passed its peak, but monetary policy hawks still hold most sway The fall in inflation in South Africa, to 7.6% y/y in August, marked the first sign that price pressures are turning a corner. But we doubt this will be enough to convince the …
21st September 2022
Nigeria’s oil output slump typifies economic woes The fall in Nigeria’s oil production in August to a 50-year low, coming alongside the recent drop back in oil prices, reinforces our downbeat view on the economy’s prospects. The OPEC Monthly …
16th September 2022
Inflation surpasses 20% Nigeria’s headline inflation rate surpassed 20% y/y for the first time in 17 years in August and we think that this will prompt the central bank to respond with a 50bp increase to its benchmark interest rate, to 14.50%, later this …
15th September 2022
Economic struggles to continue beyond Q3 July’s hard activity data out of South Africa suggest that the economy started the third quarter on a weak footing. With little momentum, GDP growth is likely to be subdued over the coming quarters. But that is …
14th September 2022
One year into Hakainde Hichilema’s presidency, Zambia has taken key steps on the path out of a sovereign default, including securing an IMF deal this month. But with debt restructuring talks yet to conclude in earnest, the road to debt sustainability …
13th September 2022
Zambia: pending debt relief may not be enough Analysis from the IMF this week suggests that, even with debt relief in the pipeline, putting Zambia’s public debt on a sustainable footing will be difficult. We will look in detail at the IMF’s projections …
9th September 2022
Fall in Q2 GDP pushes economy back below pre-pandemic level South Africa’s economy contracted by 0.7% q/q in Q2 and this is likely to be followed by only modest growth in the coming quarters. The outturn might raise second thoughts at the Reserve Bank …
6th September 2022
Zambia: IMF deal done, debt sustainability next This week’s rubber-stamping of Zambia’s IMF deal is certainly a welcome step but, with crucial sovereign debt restructuring details unknown, it remains unclear if it will prove to be sufficient to place …
2nd September 2022
Manufacturing sector rebound unlikely to last The rise in South Africa’s manufacturing PMI in August essentially reversed the sharp decline in July on the back of weaker global demand as well as severe power cuts at home. We expect external conditions …
1st September 2022
Relatively peaceful election proceedings in Kenya and Angola this month have provided a lift to investor sentiment. But with the respective losing presidential candidates challenging official results through the courts, the risk of violence lingers. …
31st August 2022
Another win for Angola’s ruling party President João Lourenço is on course to secure another term following this week’s elections in Angola. With the political backdrop little changed, we think that the economy will revert to its low growth path following …
26th August 2022
Bump in growth to be followed by slowdown GDP growth in Nigeria picked up to 3.5% y/y in Q2 as woes in the oil sector eased and the non-oil economy held up well. We expect the drag from the oil sector to diminish further in the coming quarters, but the …
Uncomfortably high inflation to keep hawks in majority The latest rise in inflation in South Africa to 7.8% y/y in July will raise the pressure on Reserve Bank officials to continue tightening policy aggressively. Even as signs of a faltering economy …
24th August 2022
Angola’s elections on Wednesday may be more competitive than ever before, but the ruling party’s decades-long hold on power is unlikely to come to an end. Assuming President Lourenço secures another term, the economy will probably slip back to a …
23rd August 2022
Ruto wins, but political risks remain elevated Deputy President William Ruto was this week declared winner in Kenya's presidential election, but the result is being challenged and the threat of violence lingers. Even if that is avoided, Mr. Ruto will …
19th August 2022
No escape from a fall in GDP in Q2 The hard activity data out of South Africa for June suggest that the economy contracted by around 1.0% q/q in Q2, and we think that activity will remain weak in the coming quarters too. June hard activity figures …
17th August 2022
Ruto wins, but political risks remain acute After nearly a week since voters went to the ballot box, William Ruto was finally announced President-elect in Kenya, but investors’ roller-coaster ride will probably continue over the coming days and weeks with …
15th August 2022
Latest jump in inflation to keep CBN in tightening mood Inflation in Nigeria jumped to 19.6% y/y last month and we think that the headline rate will rise a bit further. Policymakers are likely to respond by raising the benchmark interest rate from 14.00% …
The latest data out of Nigeria suggest that GDP growth weakened further in Q2. Ongoing production problems in the oil sector will drag on growth in the coming year and, while that is likely to be offset by fiscal stimulus ahead of February’s elections, we …
Political risks around Kenya’s elections still high The fact that Kenya’s elections have, so far, proceeded peacefully have supported a rally in the country’s bond market. But with no official results available yet and reports pointing to a tight race, …
12th August 2022
Ethiopia has been grappling with the fallout from its internal conflict and severe drought which, coming alongside spillovers from the war in Ukraine, will result in much weaker growth in the coming years and a sovereign debt restructuring is likely. Over …
10th August 2022
Zambia’s latest step towards debt sustainability News that Zambia’s official creditors agreed to provide debt relief is certainly encouraging and will unlock IMF funding. But the terms of the deal remain unknown, leaving in doubt that the country’s public …
5th August 2022
Kenya’s general election scheduled for Tuesday is set against a challenging economic backdrop, and no matter the winner, the country’s outlook is likely to remain overshadowed by large macroeconomic imbalances and high public debt risks. Kenya is heading …
Power crisis dealing heavy blow to manufacturing sector The decline in South Africa’s manufacturing PMI in July points to a large hit to activity from weaker global demand as well as severe power cuts at home. It will probably take some time before …
1st August 2022
Nigeria’s budget woes Data published by Nigeria’s Budget Office this week highlighted that, despite what should be a favourable high oil price environment, the public finances are actually getting worse. The figures showed that the federal government …
29th July 2022
For a major net oil exporter, Nigeria’s worsening economic struggles in the current high oil price environment are striking. Low oil production, which was 30% below the country’s OPEC+ quota in June, has curbed oil export revenues. Coming alongside …
27th July 2022
Overview – Sub-Saharan African economies are suffering heavily from the spillovers from Fed tightening and the war in Ukraine. Policy in the region is likely to tighten further as a result, weighing on growth. Indeed, our growth forecasts for this year …
26th July 2022
Tanzania, Kenya secure IMF funds The approval this week of an IMF package for Tanzania and the latest disbursement of a loan for Kenya will ease near-term balance of payments pressures. The Fund has pushed fiscal consolidation in both countries but, in …
22nd July 2022
South Africa’s central bank upped the pace of tightening further with a 75bp hike, to 5.50%, as policymakers’ intensifying fears about inflation (and inflation expectations) trumped any concerns about the slow and bumpy economic recovery. The increasingly …
21st July 2022
