Africa seeing mixed inflationary effects

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“There [are] a couple of countries like Nigeria, Ghana, even Zambia where inflation is still a bit of an issue. In Nigeria, inflation is the lowest in five years but at the same time they’ve got some fiscal spending issues. Monetary policy is likely to remain tight for the next 18 months, maybe up to the elections,” ABSA Capital’s Africa strategist Ridle Markus told CNBC Africa.

“Having said that, a couple of the countries, especially Southern African countries like Mauritius, Namibia, Botswana, where inflation is not a real issue at the moment, we anticipate very accommodative monetary policy at least until the middle of next year.”

According to the World Bank, economic growth in sub-Saharan Africa should strengthen to 5.3 per cent next year, marginally higher than the 5.1 per cent projected earlier this year.

ABSA Capital however, has trimmed its GDP growth projections for this year for several African countries. This is due to the weaker global environment and the negative effect it may have on much of the continent going forward. 

“What we are saying is that for 2013, much of the year is nearly gone and we have trimmed our expectations for this year for the countries that we look at – 2014 we are slightly more optimistic. We do believe that with the slow and steady recovery that is likely, and that we anticipate in the global economy, that will underpin the economic growth in 2014,” Markus explained.

“However, for now, we believe that the possibility of continued weakness is some key commodities, for some of our countries, is likely to continue to constrain some of these countries. The weaker demand from Europe is, at the moment, still a constraint for our markets.”

He added that African currencies will likely remain under pressure for the foreseeable future. 

“While you may not see a very sharp depreciation in currencies, large current account deficits in many of our economies and weak commodity prices are likely to ensure that currencies trade slightly weaker over coming months.”