With lower prices
and demand,
commodities
countries and their
currencies are
out in the cold;
that’s the lingering
challenge for Africa
in the New Year.”
12 •
The Lion King
• October - December 2015
Africa in the New Year;
It’s a Cup Half Full and
Half Empty
By Abiola Rasaq
A
s I get excited by a promising
reform outlook for Africa, a few
things even out my optimism,
with concerns that it may be a “long
hard haul” for Africa in 2016.
First, the negative momentum run-
ning through most African econo-
mies is alarming, with GDP growth
figures signalling potential recession in
some countries. Whilst economies like
Nigeria may bottom-out in 2015 and
see some sluggish recovery in 2016,
the frequency of data reeling out of
South Africa, Ghana, Kenya and a few
other economies are raising concerns
that these economies may be weak
for a little longer.
Second, despite notable pressure on
local currencies, exports remain weak
and unsupportive of the widening cur-
rent account deficits; a phenomenon
which exposes the poor production
and export base of Africa, given our
dependence on commodities, which
have high price volatilities.
Third, inflationary threat in most
African countries is becoming real.
Besides countries like Nigeria and the
Francophone West Africa countries
which are under pegged exchange
rate regime, currency depreciation
or devaluation have had significant
impact on food and other basic con-
sumer prices, noting that these coun-
tries are heavily import dependent.
Unfortunately, the worst may not be
over for African currencies, as stronger
USD outlook may extend the pressure
on these currencies. For the pegged
currencies, the negative effect is man-
ifesting in fiscal account imbalances
and weak growth; thus no African
country is immune to this syndrome.
Headline inflation is hovering around
17.4% in Ghana with an upside risk
of hitting 20% in 2016, as substan-
tial rise in utility prices (electricity and
water) and persistent increase in food
prices fully reflect on inflation rate.
Mozambique and Tanzania have seen
inflation rates increase to 6.3% and
6.6% respectively; the highest level
in the year. South Africa and Kenya
have seen inflation fall out of their
respective target bands, with even
further risk in the year ahead.
The Federal Reserve fulfilled the mar-
ket expectation of raising interest rate
in December, 2015 (the first since June
Business
|
2016 Outlook
