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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
Financial markets in Africa have taken a hit over the past month following signals from the US Fed that it intends to taper its asset purchases under QE3. Nevertheless, we think that the economic impact of the Fed’s tapering – and eventual tightening of …
28th June 2013
Signals from the US Fed that it intends to scale back its asset-purchasing programme later this year have had a notable impact on most sub-Saharan African markets over the past month. But while the best days for the region’s bond markets may now be over, …
25th June 2013
Monetary policy in sub-Saharan Africa has all of a sudden become interesting. Ghana surprised expectations by hiking interest rates last month, while countries in East Africa have continued to cut rates. And this has all taken place against a backdrop of …
24th June 2013
South Africa’s current account deficit narrowed slightly in Q1, helping to ease some of the near-term pressure on the rand. But the fact that the deficit is being funded in large part by short-term inflows of capital means that external financing risks …
19th June 2013
Almost five years after a domestic banking crisis, there are encouraging signs that Nigeria’s financial sector is slowly returning to health. But while there are reasons to be optimistic, some key challenges still remain, most notably diversifying banks’ …
18th June 2013
Technical difficulties mean that the proposed rebasing and revision of Nigerian GDP data have now been delayed until 2014. Nevertheless, whenever the revised data are released, they are likely to show that the country has overtaken South Africa as the …
12th June 2013
Around half of the fall in the rand over the past month or so appears to have been due to global factors, while the other half has possibly been due to domestic factors such as labour unrest. With these problems unlikely to abate any time soon, we expect …
11th June 2013
Today’s decision from the Bank of Uganda to cut interest rates by 100bp to 11% is probably not a one-off. But, with inflation picking up and the shilling likely to come under pressure, we doubt that rates will fall much below 10%. … Uganda: interest …
6th June 2013
We expect a fall in agricultural commodity prices and a reduction in aid flows to lead to slower growth in Rwanda over the next couple of years. Nevertheless, increasing foreign direct investment into the natural resource sector and strong household …
5th June 2013
South Africa’s manufacturing PMI remained at a weak level in May, and a combination of sluggish external demand and domestic structural constraints means the sector is likely to continue struggling in the months ahead. … South African manufacturers …
3rd June 2013
Data released over the past month show that GDP growth slowed in both South Africa and Nigeria in Q1, but this masks important differences in the fortunes of the region’s two largest economies. In Nigeria, growth slowed to 6.6% y/y, from 7.0% y/y in Q4. …
31st May 2013
The South African rand has collapsed in the past month, falling by over 9% against the US$. The magnitude of the fall means that the currency may now be somewhat undervalued, but we expect it to remain weak over the coming months. … Rand in …
29th May 2013
South African GDP growth was slower than expected in Q1, and the outlook for the coming quarters is not very promising either. Nevertheless, the fresh sell-off in the rand leaves the Reserve Bank with little room to loosen monetary policy in the next few …
28th May 2013
The collapse in the rand over the past week or so means that, despite the continued weakness of South Africa’s economy, there is little room for the Reserve Bank to loosen monetary policy. In fact, it is possible that, should the sell-off in the rand …
23rd May 2013
The Central Bank of Nigeria resisted government pressure to cut interest rates this afternoon, but we suspect that a combination of below-trend growth and sub-10% inflation will pave the way for policy easing later this year. By contrast, the collapse in …
21st May 2013
Most countries in sub-Saharan Africa have seen their current account surpluses narrow or their deficits widen over the past few years, raising concerns that the region is vulnerable to balance of payments problems. But as this Watch explains, the region’s …
16th May 2013
Following today’s release of retail sales data for March, the Capital Economics South Africa GDP Tracker suggests that the economy picked up a little pace in the first quarter of this year. We think annualised GDP growth accelerated to around 2.4% q/q, …
15th May 2013
The slowdown in Nigerian GDP growth in Q1 was due in large part to the oil sector, but more importantly from the point of view of monetary policy, growth in the non-oil sector also cooled. With inflation falling as well, we think that interest rate cuts …
10th May 2013
The tailwind of high and rising copper prices is unlikely to continue supporting growth in Zambia over the next few years. But improving governance levels and increasing infrastructure spending suggest that the country will continue to outperform the rest …
The Central Bank of Kenya cut its benchmark interest rate by a larger-than-expected 100bp to 8.50% today but, with inflation having bottomed out and the current account deficit still a cause for concern, we think this marks the end of the monetary easing …
7th May 2013
Inflation is likely to slow across West Africa in the near term, meaning that interest rate cuts are still a possibility. By contrast, inflation is likely to accelerate in East and South Africa. In East Africa, this is likely to bring an end to the recent …
3rd May 2013
South Africa’s manufacturing PMI for April suggests the sector may have rebounded a little at the start of Q2 having stagnated in Q1. But a combination of sluggish external demand and domestic structural constraints means the sector still faces a number …
2nd May 2013
Sub-Saharan Africa’s eurobond markets hit the headlines again in April when Rwanda became the latest country to issue foreign currency debt. And with much of the region continuing to enjoy low yields by past standards, we think that a number of other …
30th April 2013
The latest data for South Africa suggest that the economy picked up pace in Q1, supported in large part by a rebound in mining production after last year’s strikes. Elsewhere in the region, although Q1 data is thin on the ground, there are signs that …
26th April 2013
Growth in South Africa’s manufacturing sector appears to have stagnated in the first quarter of 2013, but some policymakers have suggested that production could soon pick up as a weaker rand helps to boost competitiveness. In this Africa Watch we argue …
24th April 2013
An economic slowdown in China is likely to drag on growth in sub-Saharan Africa, but the more important point is that the effects will vary from country-to-country. Zambia is probably the most vulnerable, followed by South Africa. Meanwhile, Nigeria looks …
22nd April 2013
The sharp drop in gold prices over the past week or so has led to a sell-off in South Africa’s stock market, but the sector’s declining importance to the overall economy means that, so long as further large falls are avoided, the impact on GDP growth …
19th April 2013
South African inflation is likely to rise above the Reserve Bank’s 3-6% target range in the near term, possibly as early as this month. Nevertheless, any spike should prove temporary, and inflation is likely to begin falling again by Q3. … South Africa: …
17th April 2013
The sharp widening of South Africa’s current account deficit in 2012 has grabbed most of the headlines, but the more worrying issue is the deterioration in the quality of capital inflows that are financing the shortfall. As such, South Africa’s economy …
15th April 2013
