Filtered by Subscriptions: Africa Economics Use setting Africa Economics
Angola’s debt sustainability in the spotlight Angolan authorities are reportedly seeking to expand the country’s $3.7bn IMF Extended Fund Facility (first approved in 2018) which, if granted, would ease balance of payments strains. But that’s a big if …
31st July 2020
The past month has brought further signs that countries across Sub-Saharan Africa are struggling to bring the coronavirus under control. Of course, the true extent of the spread of the virus is muddied by low levels of testing. South Africa has accounted …
Overview – South Africa, the oil producers (Angola and Nigeria) and tourism-dependent economies (Mauritius, Namibia and Botswana) are all likely to suffer particularly weak recoveries over the coming quarters. Many of the smaller economies in the region …
29th July 2020
Inflation edges up but rate cuts still likely South African inflation edged up to 2.2% y/y in June and, while it will rise further over the coming months, it is likely to stay close to the lower bound of the central bank’s (SARB’s) target range. The SARB …
More funding on the way? News that the IMF Executive Board has approved plans to increase its annual access limits for funding suggests that much of Africa could receive more multilateral support. We won’t go into the full details of the changes (the IMF …
24th July 2020
Divisions on South Africa’s MPC suggest that some policymakers are keen for the easing cycle to be brought to an end following today’s 25bp cut (to 3.50%). And that seems to be the view priced into markets. Even so, with growth and inflation likely to be …
23rd July 2020
Following today’s decision to keep interest rates on hold, we think that Nigerian policymakers will cut interest rates once more this year as inflation stabilises and the economic recovery proves weaker than the central bank expects. Following a surprise …
20th July 2020
Ethiopia’s dam dispute raises spectre of conflict Tensions over the Grand Ethiopian Renaissance Dam have ratcheted up over the past week, raising the risk of conflict with Egypt, which would do severe damage to both the country’s near- and long-term …
17th July 2020
The number of coronavirus cases has continued to rise sharply in South Africa, making it more likely that the government will tighten containment measures, which would add to reasons to expect a slow economic recovery. Elsewhere in the region, extremely …
15th July 2020
Sharp drop in inflation to herald in further rate cuts South African inflation plunged to 2.1% y/y in May, which probably takes it near the trough. But even as price pressures start to pick up, the headline rate will remain very subdued, allowing the …
Nigerian naira: devaluation but no unified rate Nigeria appears to have devalued the official naira exchange rate this week but the move has, if anything, further dented hopes for a shift towards a market-driven and unified exchange rate regime. We say …
10th July 2020
Hard activity data from South Africa confirm that the economy has been among the hardest hit across major EMs by the coronavirus crisis and, while the lockdown has been eased in recent months, we think that the recovery will be a lot weaker than most …
9th July 2020
Weak core inflation is likely to keep the headline rate in South Africa close to the bottom of the Reserve Bank’s 3-6% target range both this year and next. This should allow the central bank to keep interest rates low for longer than markets currently …
8th July 2020
South Africa’s net exports: changing of the winds Balance of payments figures released this week from South Africa may paint a misleadingly positive economic picture, but – as is often the case – the devil is in the details. In Q1, South Africa’s current …
3rd July 2020
Manufacturing sector on the mend South Africa’s manufacturing PMI reading offered mixed messages once again in June, but the business activity component suggests that activity in the sector continued to recover from April’s standstill. Figures released …
1st July 2020
Signs of severe economic hit emerging The fall in South Africa’s GDP in Q1 provides an early sign of the massive economic hit from the country’s severe lockdown measures and supports our view that further interest rate cuts lie in store. As measured by …
30th June 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
SA budget woes to become a permanent fixture The weak state of South Africa’s public finances was underscored by this week’s emergency budget . Finance Minister Tito Mboweni painted a grim picture, revising the 2020/21 budget deficit to 14.6% of GDP (from …
26th June 2020
Tourism sectors across Africa, like much of the rest of the world, are at a standstill and any recovery is likely to be slow going. Even if travel restrictions are lifted international tourists are unlikely to return this year, and a big hit to incomes …
25th June 2020
South Africa’s emergency budget highlighted that the dire state of the public finances is limiting the scope for fiscal support this year and attention is already focused on dealing with the legacy of higher debt. Austerity will be the first port of call, …
24th June 2020
Plummeting inflation keeps door open to more easing The plunge in South African inflation to just 3.0% y/y in April is likely to be followed by further declines, allowing the central bank to cut interest rates further. We expect another 75bp of cuts in …
The recovery in global risk appetite and in commodity prices has eased strains in balance of payments across the region. But conditions remain much worse than the they were before the crisis flared up. And while many EM sovereigns have tapped global …
23rd June 2020
The economic fallout from the coronavirus crisis is likely to push bad loans in South Africa’s banking sector to levels that trigger a round of recapitalisations, which could further increase the burden on the public finances and reinforce fears about the …
19th June 2020
Nigeria’s exchange rate: changing tack? Rumours are growing that Nigeria’s government is mulling a proposal to unify the country’s exchange rates, which essentially appears to entail allowing the official exchange rate (at around 360/$, which is used to …
Inflation rising slowly but surely The slight increase in Nigerian inflation in May, to 12.4% y/y, will probably be followed by further rises over the coming months, but we still think that more interest rate cuts lie in store later this year. Figures …
17th June 2020
Fiscal (un)realities in Nigeria Nigeria’s revised budget for 2020 is one step closer to approval, but we suspect that the deficit will be higher than the government estimates. Both chambers of the parliament passed the revised budget blueprint this week, …
12th June 2020
Early evidence suggests that the coronavirus and South Africa’s lockdown measures are taking a heavy toll on the economy and supports our view that the economy will decline sharply over the year as a whole. Our forecast is for a contraction of 11.0%, …
11th June 2020
Even after further easing of South African lockdown measures last week, a quarter of the economy remains closed. And the impact of the lockdown on unemployment and insolvencies will cause long-lasting economic damage that will hold back the recovery. We …
10th June 2020
Angola looks to restructure Angola’s debt problems finally seem to be surfacing. We’ve noted before that its public debt problem is, along with Zambia’s, one of the most acute in the region. (See here .) The government debt ratio was expected to breach …
5th June 2020
A look at South Africa’s recent history would suggest that the monetary easing cycle has further to run. We now expect an additional 75bp of cuts in the coming months, taking the repo rate from the current 3.75% to 3.00% by year-end. This is more …
2nd June 2020
Manufacturing sector coming back to life The rise in the business activity component of South Africa’s manufacturing PMI shows that conditions in the sector improved in May, having come almost to a standstill in April. With manufacturing allowed to fully …
1st June 2020
Debt talks moving forwards The past week has brought private sector debt relief for the region a step closer. Zambia hired advisors to help its restructuring talks. This was prompted by the IMF, which has made Zambia’s request for emergency financial …
29th May 2020
Governments across much of Sub-Saharan Africa have moved towards lifting coronavirus containment measures in recent weeks but, with the exception of South Africa, this has much more to do with economic concerns than success in controlling the virus’ …
We think that today’s 100bp interest rate cut by the Nigerian central bank, to 12.50%, will be followed by further loosening as economic recovery proves weaker than the central bank expects. We have pencilled in an extra 50bp cut, most likely at the …
28th May 2020
This Update answers five questions we are asked most frequently on sovereign debt risks in Sub-Saharan Africa. While there are lots of factors at play, it seems likely that governments in much of the region (South Africa being a key exception) will …
26th May 2020
SA: Downturn starting from a point of weakness South Africa’s usual run of activity figures is behind schedule due to the lockdown. (See here .) The data for February, published this week, were of course outdated. But they showed that the economy was …
22nd May 2020
South African policymakers continued to cut interest rates today, taking the repo rate down by 50bp to 3.75%, but the end of the easing cycle appears to be on the horizon. At this stage, we expect one more cut, of 25bp, to 3.50%. With the eventual …
21st May 2020
We think that Nigerian policymakers will have to allow the naira to weaken further in order to address mounting strains in the balance of payments. But hopes of a unified, flexible exchange rate regime will probably be dashed. Nigeria’s external position …
19th May 2020
Nigeria’s budget saga continues The amendments to the 2020 budget approved by Nigeria’s cabinet this week suggest that the government is not yet fully facing up to the fiscal damage caused by the coronavirus. The authorities revised the budget for the …
15th May 2020
South Africa’s public debt ratio will rise sharply this year and it would take an implausible degree of austerity or reduction in borrowing costs to stabilise the debt ratio in the following years. A debt crisis isn’t imminent, but it could be …
12th May 2020
Lifting lockdowns to lessen economic pain After relatively early action to impose containment measures, more and more African countries are relaxing restrictions. Given patchy data on cases of Covid-19, it’s hard to tell whether the infections curve has …
7th May 2020
Low-profile data suggest that the economic damage caused by lockdowns in some of the poorer economies in Africa will be more moderate than in higher-income countries. But the economic pain could be more protracted in the former group of countries as they …
6th May 2020
Manufacturing sector to wake up only gradually from April standstill The business activity indicator of South Africa’s manufacturing PMI crashed to just 5.1 in April, highlighting the severity of the country’s lockdown. With the lockdown now easing, …
4th May 2020
Rumours of private sector debt relief There seem to be growing moves towards some form of relief on debts owed to private creditors for low-income African economies. Several paths have been outlined in recent days. One suggestion is that private creditors …
1st May 2020
The risk of further sovereign defaults has risen across the region this month. Rwanda has joined Zambia in seeking to restructure its sovereign debt. And the collapse in oil prices will put more pressure on already fragile external and fiscal positions in …
30th April 2020
One consequence of the current crisis is that bad loans in Nigeria’s banking sector are likely to rise sharply. While the government would surely respond to problems at individual banks with capital injections (as it did in 2009), this would add to the …
28th April 2020
S. Africa’s fiscal stimulus: better late than never The news in South Africa this week has been dominated by the government’s announcement of a fiscal package to support the economy as well as details of easing lockdown measures from 1 st May. The fiscal …
24th April 2020
Overview – Sub-Saharan Africa is set for one of its worst downturns in decades this year. The hardest hit economies are likely to be South Africa (due to its stringent lockdown measures), the large oil producers (Nigeria and Angola), and tourism dependent …
The plunge in global oil prices has raised the risk of much steeper contractions in output in African oil producers, sharper currency falls, sovereign debt restructurings and problems at local banks. Among the major economies in the region that we cover, …
22nd April 2020
More easing on the cards as inflation softens The larger-than-expected fall in South African inflation, to 4.1% y/y, in March will give the central bank more room for manoeuvre. Although yesterday’s announcement of a fiscal package by the government …
