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The ongoing weakness of the South African economy has raised questions over the potential impact on the rest of sub-Saharan Africa. In this Watch , we argue that, due to a variety of factors, trade links with South Africa remain relatively small. This …
12th November 2013
Our GDP Tracker suggests that the South African economy lost a bit of steam in Q3, with annualised GDP growth slowing to around 2.2% q/q, from 3.0% q/q in Q2. … South Africa GDP Tracker suggests slowdown in …
7th November 2013
The Central Bank of Kenya (CBK) kept interest rates on hold today and, with inflation having peaked, pressure to raise rates in the near term has eased. But a large current account deficit that is being funded by short-term inflows of capital means that …
5th November 2013
The South African manufacturing PMI rose in October, suggesting that growth in the sector has picked up at the start of Q4. However, the series has been volatile in recent months. Cutting through some of the noise, the PMI surveys suggest that the economy …
1st November 2013
Like most other major emerging market currencies, the South African rand has rebounded over the past month as markets have adjusted to the prospect of US monetary policy staying looser for longer than initially expected. But while the rand has …
30th October 2013
South Africa’s unemployment rate fell to its lowest level since 2011 in Q3 but, while this is encouraging, it needs to be seen in a wider context. Unemployment remains above its natural rate, which itself is extremely high and unlikely to fall by much in …
29th October 2013
The production of natural resources will be a key driver of growth in Ghana, Mozambique and Tanzania over the coming years, but it is also likely to bring a number of challenges. In Ghana, oil production alone won’t be enough to solve its budget and …
25th October 2013
The South African Finance Ministry chose to revise up its forecasts for the fiscal deficit in 2014/15 and 2015/16 rather than unveil new tightening measures in today’s medium-term budget statement. This was perhaps to be expected, given the proximity of …
23rd October 2013
The prospect of monetary policy staying looser for longer than initially expected in the US has left open a window for potential bond issues in Africa. We still expect a number of countries in the region to issue debut dollar-denominated bonds in the …
22nd October 2013
The fiscal tightening entailed in Zambia's budget for 2014 means that economic growth is likely to slow over the next year or so. Nonetheless, despite the overall cut in expenditure, public investment is likely to rise, which should benefit economic …
18th October 2013
The South African rand was one of the hardest hit EM currencies during the summer sell-off and has now fallen by 15% against the US$ since the start of the year. However, as this Watch explains, a combination of a widening current account deficit and …
17th October 2013
The IMF is right to argue that fiscal policy in South Africa needs to be tightened over the coming years in order to put public debt on a stable path. But its recommendation that South Africa adopt a “debt ceiling” would not necessarily impose greater …
11th October 2013
Sub-Saharan Africa is likely to remain one of the world’s fastest-growing regions over the next few years. Domestic demand will remain the key driver of growth. And while several external headwinds will build – including weaker growth in China and tighter …
10th October 2013
On the face of it, comments yesterday from Ghana’s Finance Minister that oil revenues have been larger than expected this year should ease some concerns over the sustainability of the country’s twin deficits. However, a slowdown in import growth and a cut …
3rd October 2013
The South African PMI fell back in September but, following strong readings in the previous two months, it is likely that the manufacturing sector recorded decent growth in Q3 as a whole. … South African PMI falls but still indicates decent growth in …
1st October 2013
South Africa’s trade deficit was wider than expected in August, as the ongoing weakness of the rand led to a surge in the local-currency cost of oil imports. In turn, a widening trade deficit could lead to further weakness in the rand over the coming …
30th September 2013
Inflation has edged up in most countries in Africa in recent months, but Nigeria has bucked the trend. Here, inflation dropped to its slowest pace since April 2008 last month. This has been due in part to falling food inflation, as well as the more …
26th September 2013
The weakness of the naira and concerns over loose fiscal policy meant the Central Bank of Nigeria (CBN) kept interest rates on hold at 12.00% today, despite inflation remaining comfortably below target. Looking ahead, we expect rates to stay unchanged for …
24th September 2013
The surprise decision by the US Fed to delay the tapering of its asset purchases this month has provided a temporary reprieve for emerging market assets, including those in Africa. In light of this, we have tweaked some of our near-term forecasts for the …
23rd September 2013
The South African Reserve Bank (SARB) left rates on hold today and gave no indication that any change was likely in the foreseeable future. Growth remains below trend, but policymakers expect inflation to remain towards the upper end of the target range …
19th September 2013
A failure to sufficiently rein in large budget and current account deficits means that further monetary tightening is still likely in Ghana, despite the Central Bank’s decision to keep interest rates on hold today. We expect 100bp of hikes over the coming …
18th September 2013
An increase in capital expenditure across the region over the past few years means that the general widening in budget deficits may not be as worrying as the headline figures suggest. But there are some exceptions, most notably Ghana, where widening …
17th September 2013
The turbulence in financial markets over the past few months has raised concerns about how emerging markets will perform as global monetary conditions tighten. In the case of Africa, current account deficits in several countries have widened since 2008, …
13th September 2013
South Africa’s current account deficit widened in Q2, and the shortfall continues to be funded in largepart by short-term capital inflows. As a result, the economy remains among the most vulnerable to furtherreversals in investor sentiment towards …
10th September 2013
The widening of fiscal deficits in several economies in sub-Saharan Africa over the past few years has increased the importance of subsidy reform. The good news is that policymakers are starting to tackle the issues of subsidies, but reform is likely to …
9th September 2013
African currencies have come under renewed pressure in August, with the South African rand and the Ghanaian cedi suffering more than most. But while currencies have weakened, local equity markets have continued to rally. … Next move in Kenyan interest …
3rd September 2013
The South African manufacturing PMI rose to a six-year high in August, indicating a further uptick in overall GDP growth in Q3. But relatively high wage increases agreed in the past month or so are likely to add to underlying manufacturing competitiveness …
2nd September 2013
African currencies have come under renewed pressure in August, with the South African rand and the Ghanaian cedi suffering more than most. But while currencies have weakened, local equity markets have continued to rally. … Currencies still under …
30th August 2013
Economic growth in both South Africa and Nigeria accelerated a little in Q2, but there are important differences in the performance of the region’s two largest economies. In South Africa, GDP growth picked-up to an annualised rate of 3.0% q/q, from 0.9% …
28th August 2013
After growing at its slowest quarterly pace in almost four years in Q1, it was always likely that South African GDP would accelerate in Q2. Nevertheless, the pick-up in growth shouldn’t detract from the fact that the economic outlook remains lacklustre. …
27th August 2013
The renewed slump in the rand has once again cast a spotlight on some of South Africa’s economic vulnerabilities. But while it is likely to put the balance of payments position under pressure and keep inflation elevated in the near term, it could help to …
21st August 2013
South African inflation breached the upper bound of the SARB’s target range in July, and the effects of a weak rand means it is likely to accelerate a little further in the coming months. This will continue to prevent the SARB from loosening policy to …
Agreements have now been reached in more than half of the sectors holding talks during South Africa’s current wage negotiation season. However, a lack of agreement in the mining sector means the risk of labour unrest remains high, while relatively large …
15th August 2013
GDP data due to be released over the next few weeks are likely to show that economic growth in sub-Saharan Africa picked up in the second quarter of this year. But while regional prospects as a whole seem bright, we remain of the view that SSA’s largest …
14th August 2013
Our forecasts for a fall in oil prices, coupled with a relatively high rate of domestic inflation, suggest that pressure on the Nigerian naira is likely to build over the next year or so. We think that this could prompt the Central Bank of Nigeria to …
9th August 2013
The Capital Economics South Africa GDP Tracker suggests that the economy picked up pace in Q2, with annualised GDP growth accelerating to around 3.0% q/q, from 0.9% q/q in Q1. … South Africa GDP Tracker suggests pick-up in …
8th August 2013
The South African manufacturing PMI rose to a five-month high in July, pointing to a modest recovery inthe sector. But while this comes as welcome good news, problems in the domestic economy mean thatmanufacturers still face considerable challenges in the …
1st August 2013
Rising inflation and a weakening currency means that interest rates in Ghana are still likely to rise again before the end of the year, despite the Central Bank’s decision to keep rates on hold today. We expect 100bp of hikes, which would bring the key …
31st July 2013
Financial markets in Africa were relatively calm in July following the wide-scale sell-off in June. Currencies, bonds and equities have rallied, although bond yields remain above the lows seen at the beginning of Q2, and stock markets are still some way …
The main message from this month’s monetary policy meetings in Africa is that the easing cycle that began in several countries in mid-2012 has probably now come to an end. But at the same time we do not expect a sudden shift towards policy tightening. …
30th July 2013
The twin tailwinds of debt relief programmes from Western governments and high commodity prices have helped to dramatically reduce public debt levels in sub-Saharan Africa over the past few years. But these tailwinds are likely to ease over the coming …
26th July 2013
South African inflation unexpectedly slowed in June, as muted demand pressures more than offset the effects of a weak rand. Nevertheless, we still expect inflation to accelerate in the coming months, which will prevent the Reserve Bank from cutting …
24th July 2013
The weakness of the naira over the past few months has made it increasingly unlikely that the Central Bank of Nigeria will cut interest rates this year. We now expect the policy rate to remain on hold at 12.00% for the remainder of 2013 and 2014. … …
23rd July 2013
The ongoing weakness of the South African rand means that, despite the sluggish pace of economic growth, there is little room for the Reserve Bank to loosen monetary policy. We have taken out our forecast for an interest rate cut early next year but, …
18th July 2013
We expect sub-Saharan Africa to remain one of the world’s better performing regions over the next few years. But this masks some key differences between countries, and indeed some economies will struggle. The worst performer is likely to be South Africa, …
17th July 2013
A pick-up in GDP growth and a rise in inflation, against a backdrop of hefty twin deficits, have led to concerns that Ghana’s economy is overheating. But while a number of economic vulnerabilities are building, we think that, for the time being, talk of …
11th July 2013
With inflation likely to accelerate over the next few months and the current account deficit still a cause for concern, we think the Central Bank of Kenya’s decision to keep its benchmark interest rate on hold at 8.50% today signals an end to the recent …
9th July 2013
The latest round of biennial economy-wide wage negotiations in South Africa could be the catalyst for a renewed flare-up in labour unrest. But they are also likely to cast a spotlight on the country’s structurally high rate of unemployment and its lack of …
Given that credit growth remains sluggish, we wouldn’t rule out the possibility of further interest rate cuts in Uganda over the next few months. But on balance, a combination of a pick-up in food inflation and a large current account deficit means that …
2nd July 2013
South Africa’s manufacturing PMI picked-up in June, suggesting that, having contracted in Q1, the sector made a positive contribution to overall GDP growth in Q2. However, a combination of sluggish external demand and structural domestic problems means …
1st July 2013
