Africa Market Update - April 2015

MARKET UPDATE – AFRICA | March 2015
The depreciation
of the Kwanza
poses a threat to
inflation in the
coming months.
With the food
index constitution
a considerable
portion of
the country’s
Consumer Price
Index (CPI), a rise
in the cost of food
imports is bound
to negatively
impact inflation.
Import Breakdown 2013
MONETARY POLICY
OUTLOOK
Inflation Favourable but Faces Risks
Inflation continues to trend favourably
within the 7.0% - 9.0% target band in what
we assess has been driven by the September
2014 monetary tightening that saw the
policy rate hiked by 20.0 bps to 9.0%. In line
with our Q4, 2014 forecast, inflation nudged
upwards between September and December
2014 on the back of a slash of the fuel
subsidy program. The taming of inflation at
within the 7.4% - 7.5% horizon is likely to
buoy investor confidence in Angola’s policy
response in view of a challenging macroeconomic
environment driven by the plunge in
oil prices.
Inflation vs Central Bank
Benchmark Rate
Source: EcoBank 2015, StratLink Africa
The spill-over effect of the weakening Kwanza
is bound to inflict upward pressure on inflation
owing to the rising cost of imports.
The country’s reliance on food imports (Angola
imports at least 50.0% of the food it
consumes) renders it especially vulnerable
to imported inflation when the currency depreciates.
Balance of Trade as % of GDP
Source: Bloomberg, StratLink Africa
As indicated, however, the depreciation of
the Kwanza poses a threat to inflation in
the coming months. With the food index
constitution a considerable portion of the
country’s Consumer Price Index (CPI), a rise
in the cost of food imports is bound to negatively
impact inflation.
CPI Composition
Angola
Kenya
Food Index 46.6% 39.4%
Source: IMF 2014, StratLink Africa
Energy Index 12.5% 16.6%
Transport 7.9% 7.3%
Others 33.0% 36.7%
Source: Bureaus of Statistics, StratLink Africa
28 | StratLink Africa Ltd.
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