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Standard Bank
Africa markets watch Africa September 2008
Jan Duvenage, Anita Last, Yvonne Mhango & Victor Munyama
Recent developmentsZimbabweOn Monday, 15 September 2008 we witnessed the historic signing of the power-sharing agreement
that lays the foundation for the formation of a transitional government of national unity in Zimbabwe. For a lot of
Zimbabweans this agreement holds the promise that they finally have a government that will start addressing their
plight. The international community is watching in anticipation of a strong and genuine commitment of the
signatories to rebuilding the country. This agreement is built on various aspects identified as significant for the
restoration and rebuilding of the countrys economy; for example, land reform, constitutional reform and freedom of
expression and communication. The implementation of these pillars of the agreement should convey a strong
message of commitment and cooperation among the countrys stakeholders. The success of this fragile agreement
depends not only on the benevolence of the signatories to the deal but on their ability to ascend the differences and
animosity eminent in the negotiation stages. To the Zimbabweans, normality will be realised when the rights to pave
their own path are fully entrenched and protected through the ballot box. It is important to note that the agreement
signed does not outline policy prescription necessary for economic recovery nor does it present clear government
thinking necessary to restore some confidence in the country. The agreement does, however, provide a platform
from which genuine and inclusive deliberations on policy direction and an economic recovery plan can now start.
Commitment and compromise from all signatories to the agreement might help to restore private sector confidence
that has become a negative force in the recent past.
Angola - Almost one month after voters elected parliamentary representatives for the first time in 16 years, Angola
has sworn in its new parliament. One-hundred-and-ninety-one legislators from the Movement for the Liberation of
Angola (MPLA) took seats in the legislature, while the largest opposition party, the National Union for the Total
Liberation of Angola, has just 16 representatives. The remaining seats are shared among the smaller opposition
parties, with the Social Renewal Party claiming eight, the Angola National Freedom Front claiming three and theNew Democratic Coalition claiming two. The new House speaker is former Prime Minister Fernando Dias dos
Santos, who replaces Roberto de Almeida. A new cabinet is expected to be composed soon.
Mauritius - The central statistics bureau of Mauritius has revised its 2008 real GDP forecast down from 5.7% to
5.6%. Mauritius is closely linked to international financial markets and the slowdown in the US and Europe will have
significant connotations for the Mauritian economy and its reliance on through-trade and transportation. Despite a
deteriorating external environment and softer growth, there are still signs of strength in the economy. The sugar
sector continued to perform above expectations in the second quarter of this year and manufacturing also came in
on the upside compared to the first quarter of this year.
Nigeria - The Central Bank of Nigeria (CBN) held an emergency meeting of its Monetary Policy Committee on 18
September 2008 to assess the state of the domestic banking system in the context of the current global financial
crisis and to address the liquidity shortages eminent at that time. In an attempt to lubricate the system, the MPCdecided to reduce the Monetary Policy Rate (MPR) by 50 basis points from 10.25% to 9.75%; reduce the cash
reserve ratio from 4% to 2%; reduce liquidity requirements for banks from 40% to 30%; extend the repo tenors with
the CBN from overnight to 90 days, 180 days and 360 days; and to buy and sell securities (Treasury bills) through
two-way quotes. In the short term, these measures should easily inject about NGN1.5 trillion into the system.
Zambia - Four presidential candidates filed their nomination papers between 23 and 26 September 2008 for the
presidential by-elections scheduled for 30 October 2008. The main contenders are the ruling Movement for
Multiparty Democracys candidate, the current acting president, Rupiah Banda, the colourful Michael Sata of the
Patriotic Front and Hichelema Hakainde of the United Party for National Development (UPND). The prospects for
the UPND candidate, who performed surprisingly well in the 2006 general election, are expected to be diluted by the
fact that at the upcoming presidential by-election he will not be representing the three-party alliance, the United
Democratic Alliance, as he did in 2006. This time around, the UPNDs former alliance partners, the United National
Independence Party and the Forum for Democracy and Development, are backing the ruling MMDs candidate, thus
boosting Bandas prospects..
Botswana
Ghana
Kenya
Lesotho
Malawi
Mauritius
Mozambique
Namibia
Nigeria
Swaziland
Tanzania
Uganda
Zambia
Zimbabwe
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Standard Bank Group EconomicsStandard Bank Group Economics
Botswana - picture gallery
Real GDP growth - %
Source: IMF
Sectoral contribution to GDP - %
Source: IMF
Foreign exchange reserves
Source: Bank of Botswana
Trade balance Pula million
Source: Bank of Botswana
Government budget balance - % of GDP
Source: IMF
Diamond prices - US$ index, 1982 = 100
Source: Bank of Botswana
Weights of consumer price index (CPI) constituents
Source: Bank of Botswana
Botswana Stock Exchange indicators
Source: Bloomberg, Bank of Botswana
8.3
4.9
5.7 6.06.3
4.7
3.6
5.4
5.0
4.3
0
2
4
6
8
10
00 01 02 03 04 05 06 07 08f 09fMining38.0%
Agriculture2.1%
Other14.3%
Construction4.6%
Manufacturing
3.6%
Trade &hotels10.4%
Government16.5%
Banking,insurance
10.5%
10
20
30
40
50
3,000
5,000
7,000
9,000
11,000
2004 2005 2006 2007 2008
Forex reserves Import cover
US$ mn months
0
5,000
10,000
15,000
20,000
25,00030,000
35,000
2002 2003 2004 2005 2006 2007p
Exports Imports Merchandise trade balance
-6
-4
-2
0
2
4
6
8
10
02/03 03/04r 04/05r 05/06p 06/07b
120
130
140
150
160
170
180
2001 2002 2003 2004 2005 2006 2007 2008
22%
19%
9%11%
8%
31%
Food Transport
Alcohol & tobacco Housing
Clothing Other
0
3
6
9
12
0
10
20
30
40
2002 2003 2004 2005 2006 2007 2008
Market cap. (lh) Domestic index (rh)
Pula billion '000 month-end
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Standard Bank Group EconomicsStandard Bank Group Economics
Ghana
Inflation declines for two consecutive months. Theharvest season, which started in August, has provided somerelief from food inflation and headline inflation declined to18.1% y/y in August from 18.3% y/y in July and 18.4% y/y inJune. Food, which represents around 45% of the CPI basketof goods, rose from 7.5% y/y in August 2007 to 17.7% in
June 2008. This was due to the restriction of local foodsupply in the north of the country by drought in the first partof 2007, followed by flooding in September coupled with theupward trend in global food prices at a time of high transportcosts. Over the same period, non-food inflation rose from10.9% y/y to 18.9% y/y driven by changes in utility pricesand transport costs. The moderation in international crude oilprices and the improved domestic food supply on the back ofthe ongoing harvest season should continue to support amar inal declinin trend.
Bank of Ghana keeps the policy rate at 17%. TheMonetary Policy Committee (MPC) hiked the policy rateby 100 basis points to 17% in July in response toaccelerating inflation. The central bank policy rate (primerate) was raised from 13.5% to 14.25% in March andagain in May by 175 basis points to 16%. Following the
MPCs rate decision in July, average commercial banklending rates were similarly revised upwards within arange of 22% to 41%. (The commercial bank ratescontinue to show high spreads between deposit andlending rates and are also well above the Bank ofGhanas prime rate). Due to a declining inflation trendwe do not expect an interest rate hike but we do expectmonetary policy to remain tight in the presence ofinflationary pressures stemming from pre-elections endin and hi h utilit rices.
Inflation - % y/y
Source: Bank of Ghana
Interest rates - %
Source: Bank of Ghana
The cedi continues to depreciate. The cedi lost someground during 2007 and depreciated by 5%, 7% and 17.5%
against the US dollar, pound sterling and euro respectively.Demand pressures were exerted mainly from the golden jubilee anniversary celebration, preparations for hosting theAU summit and the continued energy crisis. In addition tothis, lower cocoa production, as a result of extreme rainfall,led to a 33.8% decline in earnings from exports of cocoabeans and products. Despite strong international prices forgold and cocoa, the national currency continued todepreciate in 2008 - a trend that was fuelled by a large andburgeoning current account deficit stemming from capitalgoods and oil imports. The cedi largely stabilised in Augustand September and traded between GHc1.1543/US$ andGHc1.1640. We expect marginal depreciation to continue,es eciall in a re-election context.
Favourable cocoa harvest expected. Ghanas CocoaBoard (Cocobod) expects favourable output for the
2007/08 season as a result of improving weatherconditions. Purchases declared by private buyersreached 566 340 tonnes in the first 25 weeks of the2007/08 season, which represents an increase of 10.2%over the same period in 2007. Consequently, Cocobodincreased its initial estimate of 600 000 tonnes at thestart of the season to 634 000 tonnes (8% increase).Last year the country declared total production of 614469 tonnes, down from a record 740 457 tonnes in 2006.The average price of cocoa bean exports (US$1 942.2per tonne) at the end of 2007, increased by 7.7% toUS$2 091.8 per tonne in the first quarter of this year.
Exchange rates
Source: Bloomberg
Cocoa prices
US$/metric tonne
Source: IMF
6
10
14
18
22
26
2004 2005 2006 2007 2008
5
10
15
20
25
30
35
2004 2005 2006 2007 2008Prime 91-day t-bill Lending
1.20
1.30
1.40
1.50
1.60
0.90
0.94
0.98
1.02
1.06
1.10
1.14
1.18
2007 2008
USD (rhs) EUR (lhs)
1000
1500
2000
2500
3000
3500
2004 2005 2006 2007 2008
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Standard Bank Group EconomicsStandard Bank Group Economics
Ghana picture gallery
Real GDP growth - %
Source: Bank of Ghana
Sectoral contribution to GDP - %
Source: Bank of Ghana
Foreign exchange reserves - US$ million
Source: Bank of Ghana
Trade account - US$ million
Source: Bank of Ghana
Government budget balance - % of GDP
Source: IMF
Gold Price - US$/oz
Source: Reuters
Weights of consumer price index (CPI) constituents
Source: Bank of Ghana
Ghana Stock Exchange index
Source: Bloomberg
0
1
2
34
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008
Trade, hotel & restaurant Services
Agriculture Cocoa production & marketing
Mining & quarrying Manufacturing
Construction Other
0
500
1000
1500
2000
2500
3000
2004 2005 2006 2007 2008
-6000-4000-2000
020004000
60008000
10000
2001 2002 2003 2004 2005 2006 2007
Imports Exports Trade Balance
-10
-8
-6
-4
-2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
400
500
600
700
800
900
1000
2004 2005 2006 2007 2008
52%
10% 9%
7%
6%
5%
4%
4%3%
Food & Bev. Clothing & FootwearUtilities FurnishingsTrans. & Comm. Enter.Health Alcohol & Tobacco
Misc.
2000
4000
6000
8000
10000
12000
2004 2005 2006 2007 2008
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KenyaStrong food price increase drives up Septembers inflation to
28.2% y/y. This years poor long rains season (on the heels of
insufficient rainfall in the end-2007 short rains season) has
exacerbated the deterioration in food security. Declining food
stocks put upward pressure on prices, 2% m/m in September, and
spurred an acceleration in food inflation to 37.2% y/y from 36.2%
y/y in August. The incline in non-food inflation was largely due to
a significant increase in housing costs in September, 2% m/m.
The fuel and power, and transport and communication sub-
indices reported softer price increases in September, 0.5% m/m
and 0.3% m/m respectively, from 3.6% m/m and 0.9% in August.
Given the persistent food inflationary pressures, overall inflation is
projected to only slip below 20% in the second quarter of 2009.
Short-term interest rates ease. Following the central
banks decision to hike the policy rate to 9% in June 2008,
there was a parallel increase in the 91-day Treasury bill
yield to 8.03% in July. The tightening of policy was effective
at moderating the liquidity situation, which has now
normalised. The central bank has insisted that the drivers of
inflation are exogenous and due to liquidity to justify its
decision not to tighten policy despite high inflation. Greater
appetite for short-term debt over that with a longer maturity
partly explains the slide in short-term rates. Investors are
uncertain about future prospects, given the global financial
turmoil and recent political crisis in Kenya, are reluctant to
put their money in long-dated debt instruments.
Inflation - % y/y
Source: Sources: National Bureau of Statistics, Central Bank of Kenya
Interest rates - %
Source: Central Bank of Kenya
The Kenyan shilling slides. The shilling depreciated by a
significant 5.7% against the US dollar in September, compared
to the exchange rate in August, to a monthly average exchangerate of KES71.65/USD. While the US dollars sharp gain of 3.7%
against the euro contributed to the weakening of the exchange
rate, the decline in foreign exchange inflows stemming from
agricultural exports, capital inflows and tourism revenue added
to the shillings woes. International reserves dropped to 3.2
months of imports at the end of September, from four months in
January, partly explaining the depreciation of the Kenya
currency. The shilling is now weaker against the US dollar than it
was during the political turmoil in the first quarter of 2008.
Depreciation pressures are expected to persist over the short
term.
Liquidity pressures subside. As expected, broad money
(M3) growth decelerated in the third quarter of 2008 to
17.1% y/y in August, from this years peak of 28.5% y/y inApril that reflected the surge in the growth rate of net foreign
assets due to the capital inflows related to the Safaricom
IPO. The slowdown in M3 growth was partly due to the
payment of refunds related to investors that had
oversubscribed to the IPO. M3 growth is expected to
stabilise at current levels. The deceleration of reserve
money growth to 16.7% y/y in May from 24.5% y/y in
January, reflects the decline in currency in circulation,
particularly during the political crisis when economic activity
was interrupted. However, from mid-2008 it is expected to
have picked up as the economy recovers.
Exchange rates
Sources: Bloomberg, Standard Bank Group est.
Money supply growth - % y/y
Source: Central Bank of Kenya
0
5
10
1520
25
30
35
2004 2005 2006 2007 2008
OverallUnderlying (excl. food)Underlying (excl. food, energy & transport)
5
7
9
11
13
15
2005 2006 2007 200891-day TB rate Average lending rate
Central Bank Rate Weighted average repo
6
8
10
12
14
16
60
70
80
90
100
110
2004 2005 2006 2007 2008
KES/USD KES/EUR KES/ZAR (rhs)
0
6
12
18
24
30
2004 2005 2006 2007 2008
Broad money (M3) Reserve money
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Standard Bank Group EconomicsStandard Bank Group Economics
Kenya - picture galleryReal GDP growth - %
Source: Kenya National Bureau of Statistics, Standard Bank est.
Sectoral contribution to GDP - %
Source: Central Bank of Kenya
Foreign exchange reserves import cover
Source: Central Bank of Kenya
Trade account - US$ million
Source: Central Bank of Kenya
Government finance - % of GDP
Source: Central Bank of Kenya
Tea, Mombasa, Kenya, Auction price US cents per kilogram
Source: IMF
Weights of consumer price index (CPI) constituents
Source: Central Bank of Kenya
Nairobi Stock Exchange indicators
Source: Central Bank of Kenya
5.3 5.86.4
7
2.3
4.2
0
1
2
3
4
5
6
7
8
2004 2005 2006 2007 2008p 2009f
Agriculture,forestry &
fishing30%
Manufacturing
11%
Wholesale &retail trade
11%Hotels &
restaurants2%
Financialservices
4%
Construction3%
Transport,storage &commun.
12%
Government
14%
Real estate,renting &bus. serv.
6%
Electricity &water3%
Community,social &personalservices
4%
2.5
3.0
3.5
4.0
4.5
0
600
1200
1800
2400
3000
3600
2004 2005 2006 2007 2008
Gross foreign reserves Import cover
US$ millions months
-1500
-1200
-900
-600
-300
0
0
500
1000
1500
2000
2500
2004 2005 2006 2007 2008
Exports Imports Trade deficit
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
150
200
250
300
350
50%
12%
6%
6%
9%
6% 4%2% 2% 3%
Food and drink Housing
Recreation and education Household goods and services
Clothing and footwear Transport and communication
Fuel and power Medical goods and services
Personal goods and services Alcohol and tobacco
0
200
400
600
800
1000
1200
1400
3500
4000
4500
5000
5500
6000
2006 2007 2008
Market Capitalisation (rhs)
NSE 20 Share Index (1966=100)
Kshs billions
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Standard Bank Group EconomicsStandard Bank Group Economics
LesothoOverall inflation driven by food and energy prices. Inflation is
largely imported from South Africa as almost 85% of Lesothos
goods and services are sourced from there. High international
and regional food prices and high crude oil prices have impacted
negatively on the inflation rate. Drought conditions also add to
food price pressures as the subsistence economy is adversly
affected. In August overall inflation reached 11.2% y/y, one of
the highest rates in years, from 10.5% y/y in the previous month.
Food inflation was 15.2% y/y in August and 14.9% y/y in July,
somewhat lower than the high of 18.7% y/y recorded in
February. The food group has a weight of nearly 40% in the CPI.
Transport prices also rose steeply; by 14% y/y in August and
12.4% y/y in July.
Interest rates are linked to South African trends. Lesotho
is a member of the Common Monetary Area (CMA) with
South Africa, Namibia and Swaziland. Membership implies
that the county has limited control over monetary policy,
which is imported from South Africa. The Central Bank of
Lesotho monetary policy targets net international reserves of
US$500 million to support the 1:1 currency peg with the
rand. The Lombard rate, the policy rate, is set at 400 basis
points above the 91-day Treasury bill rate. Interest rates in
South Africa have risen on the back of higher inflation, but
the prices could start easing in 2009, leaving room for the
central bank to start cutting rates, reducing the prime rate
from 15.5% to 13.5% in December next year.
Inflation - % y/y
Source: Bureau of Statistics
Interest rates - %
Source: Central Bank of Lesotho
The currency depreciates. The loti is pegged at par to the South
Africa rand under the CMA agreement. Economic conditions in
Lesotho have no effect on the exchange rate. Exportcompetitiveness is, however, linked to the value of the currency.
The weaker long-term trend against the US dollar is welcome
relief for exporters, but imported food and fuel will become dearer
as a result, driving overall inflation higher. The exchange rate
averaged LSL7.70/USD in August compared to LSL7.34/USD in
July. Standard Bank expects that the exchange rate will average
LSL7.78/USD in 2008; LSL7.97/USD in 2009 and LSL8.10/USD
in 2010. Turmoil in the banking and financial markets, falling
commodity prices and a slowing world economy will ensure that
the exchange rate remains volatile.
Basotho mineworkers in South Africa. Basotho mine-
workers employed on South African mines, particularly gold
mines, provide valuable income for Lesotho households.Even though the number of miners employed has fallen
dramatically, the value of the remittances has continued to
rise. In 2000 the number of Basotho miners employed in
South Africa was 64 907, but fell to 51 595 in 2006. Over the
same period the value of the remittances rose from M1 400
million to M1 983 million, as the average annual wage rose
from M30 131 to M53 670. The higher gold prices should
help boost demand for mine labour.
Exchange rate - LSL/USD
Source: Bloomberg
Mineworkers and remittances
Source: IMF, Central Bank of Lesotho
0
5
10
15
20
2004 2005 2006 2007 2008
Consumer inflation Food inflation
5.0
7.5
10.0
12.515.0
17.5
20.0
2003 2004 2005 2006 2007 2008
Prime Lo mbard rate 91-day TBs
5
6
7
8
9
10
11
12
00 01 02 03 04 05 06 07 08 09
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
50,000
52,000
54,000
56,000
58,000
60,000
62,000
64,000
66,000
2000 2001 2002 2003 2004 2005 2006
M millionsNumber
Number employed (lh) Miners' remittances (rh)
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Lesotho - picture galleryReal GDP growth - %
Source: IMF
Sectoral contribution to GDP - %
Source: IMF
Foreign exchange reserves
Source: Bloomberg
Trade balance US$ million
Source: IMF
Government budget balance - % of GDP, including grants
Source: IMF
Manufacturing index Index 2000=100
Source: Bureau of Statistics
Weights of consumer price index (CPI) constituents
Source: Central Bank of Lesotho
Capital account
US$ million
Source: IMF
2.3 1.8
2.8 2.7
4.2
2.9
7.2
4.9 5.25.4
0
1
2
34
5
6
7
8
00 01 02 03 04 05 06 07 08f 09f
Crops10.0%
Livestock5.8%
Manufacturing
17.9%
Electricity &water
5.4%
Construction13.3%
Wholesale &retail8.6%
Financialintermed
5.9%
Public admin7.8%
Education7.6%
Other17.8%
4.04.55.05.56.06.57.0
7.58.0
200300400500600700800
9001,000
2003 2004 2005 2006 2007
MonthsUSD m
Gross reserves Import cover
-1000
-500
0
500
1000
1500
01 02 03 04 05 06e
Exports Imports Trade balance
-10
-5
0
5
10
15
20
02/03 03/04 04/05 05/06 06/07 07/08p
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007 2008
Textile and clothing Total manufacturing
Food & non-alc. bev.
39.8%
Furnishings,h/h equip,
maint.17.0%
Clothing &footwear15.6%
Transport7.8%
Alcoholicbeverages &
tobacco6.4%
Other13.3%
-800
-600
-400
-200
0
200
400
01 02 03 04 05 06eTrade balanceCurrent account (incl transfers)Capital & financial account
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Standard Bank Group EconomicsStandard Bank Group Economics
MalawiInflation accelerated to 9.1% y/y in August. Inflationfollowed global trends, accelerating from 8.7% y/y in July,mainly due to fuel and maize price increases. In spite of highoil prices, inflation recorded the lowest rates in decades in2007 and averaged just below 8%. However, oil prices thatkept reaching new highs as well as a marginal seasonalincrease in food inflation towards the end of last year sawoverall inflation starting to increase moderately from ahistorical low of 7.1% y/y in September 2007 to 8.2% y/y inMarch 2008. Although inflation eased in April and May dueto the seasonal decline in food costs, the upward trendcontinued in June. High oil prices and increased governmentspending ahead of the 2009 election as well as moneysupply growth pose further upside risks to overall inflation.
Monetary Policy Committee keeps the policy rateflat. In view of the current inflationary pressuresstemming from high international oil prices as well asaccelerating money supply growth, the Monetary PolicyCommittee maintained its monetary stance at itsmeeting, and kept the bank rate at 15% and the liquidityreserve requirement at 15.5%. Despite the governmentsintention to encourage private-sector-led development ofthe economy, we expect monetary policy to remain tightin order to contain inflation expectations. However,should inflation drop to the estimated levels of below 7%presented in the 2008/09 budget, we expect interestrates will be brought down to around 12%, as projectedin the 2008/09 budget.
Inflation - % y/y
Source: National Statistics Office
Interest rates - %
Source: Reserve Bank of Malawi
Kwacha stability ensured through RBM intervention. Theauthorities attach importance to exchange rate stability as anintermediate measure in maintaining macroeconomicstability. The kwacha remained relatively stable against theUS dollar in the first three quarters of 2008 and averagedMWK140.35/USD, MWK140.63/US$ and MWK140.69respectively. In September the kwacha was slightly weakerat MWK140.82. The economy is into the seasonal leanperiod following the end of the tobacco auctions. Thepressure on foreign reserves from fertilisers and oil importswill remain a concern for some time, although the kwacha isexpected to receive some support from donor funds and theauthorities. The RBM is expected to continue intervening inthe foreign exchange market and we therefore expect thekwacha to trade within a narrow band of MWK140/US$ andMWK142/US$.
Tobacco auction floors more than doubled sales.The tobacco auction floors had processed about 143million kilograms valued at US$348 million as at the endof July 2008. In value terms, the quantity is almostdouble that posted for the whole season last year(US$185 million). As at 22 August, 168.7 kilograms ofthe green gold had been sold, earning US$412.3 million
an average price of 244 US cents per kilogram. Out ofthe total sold, burley contributed 145.9 million kilograms(86.5%) whereas flue-cured contributed 20.9 millionkilograms (12.3%). All foreign currency payments fortobacco sold in Malawi are now made through thecentral bank and not commercial banks as in the past.The onset of uranium exports next year will be anadditional source of support for the local currency.
Exchange rates
Source: Bloomberg
Tobacco export price
UScts/kg
Source: Tobacco Control Commission
0
4
8
12
16
20
2004 2005 2006 2007 2008
Overall Inflation Non-food inflation
Food inflation
5
15
25
35
45
2004 2005 2006 2007 2008
Prime-avg Bank rate 91-day t-bill
14
16
18
20
22
24
60
100
140
180
220
260
2004 2005 2006 2007 2008
USD EUR ZAR (rhs)
150
200
250
300
350
2004 2005 2006 2007
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Malawi picture galleryReal GDP Growth - %
Source: IMF
Sectoral contribution to GDP - %
Source: OECD 2007
Foreign exchange reserves import cover
Source: Reserve Bank of Malawi
Trade Balance - US$ million
Source: Central Statistics Office
Government finance - %
Source: IMF
Tobacco exports million Kg
Source: Reserve Bank of Malawi
Weights of consumer price index (CPI) constituents
Source: Central Statistics Office
Malawi Stock Exchange index
Source: MSE
-6
-4
-2
02
4
6
8
10
2001 2002 2003 2004 2005 2006 2007 2008 2009
Agriculture Mining and quarryingManufacturing UtilitiesConstruction DistributionTransport and Comm Finance & InsurancePrivate social services Government services
1.5
2.0
2.5
3.0
3.5
50
100
150
200
250
2004 2005 2006 2007 2008
Foreign reserves Import cover
US$ million Months
-1000
-500
0
500
1000
1500
2001 2002 2003 2004 2005 2006 2007 2008
Imports Exports Trade Balance
-16-14-12-10
-8-6-4-2
0
02/03 03/04 04/05 05/06 06/07 07/08e 08/09f
Including grants Excluding grants
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007
58%12%
9%
6%
6%5% 4%
Food Housing
Clothing & footwear Misc.
Beverage & tobacco Transport
Household operation
0
1000
2000
3000
4000
5000
6000
2006 2007 2008
8/14/2019 Africa Market Watch - September
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Standard Bank Group EconomicsStandard Bank Group Economics
MauritiusContinued pressure on inflation from high food and oilprices. Headline inflation has been on a declining trendsince July last year but remained relatively high at around9%, largely as a result of the pass-through effects of highfood and energy prices. The appreciation of the rupee in thefirst four months of this year dampened the impact ofmounting import prices, and inflation came marginally downto 8.8% y/y in May. After remaining level during June,inflation accelerated to 9.1% y/y in July and to 9.5% y/y inAugust. Once again the main pressure came from food andfuel. With oil prices showing a softening bias and food pricesexpected to plateau, external pressures are easing, althoughdomestic pressures such as strong demand are expected toremain. Our expectation is that overall inflation will slightlyexceed the 8.6% average projected in the 2008/09 budget.
Further interest rate cuts ruled out. Against thebackdrop of a reduction in policy interest rates by the USFederal Reserve and the Bank of England as well aspotential downside risk to economic growth stemmingfrom decelerating growth in major trading partners, theBoM cut the repo rate by 25 basis point to 9% inFebruary, lowered it further to 8.5% in March and in Mayagain by 50 basis points to 8%. In view of growingdemand-side pressures on inflation and no slowdown infood and fuel prices, the BoM increased the repo rate on21 July to 8.25%. It is likely that the MPC will commit toanother interest rate rise, especially if inflation pressescloser to double digits. However, there are some positivesigns, particularly with regard to commodity prices suchas food and oil which are thought to have peaked.
Inflation - % y/y
Source: Central Statistics Office
Interest rates - %
Source: Bank of Mauritius
Rupee depreciated further in September toMUR28.67/USD. Supported by FDI inflows, record tourismearnings and the depreciation of the US dollar on currencymarkets, the rupee appreciated by 9% in the first quarter ofthis year to a four-year high of MUR25.5/US$. In April thistrend was reversed when the rupee averaged MUR26/US$,MUR26.5/US$ in May and MUR27.2/US$ in June. This wasmainly on account of continued deterioration of the currentaccount as import prices, particularly food and fuel, pushedup the import balance. The extent and duration of the globaldownturn will play a large part in export demand as Mauritiusis closely linked to international financial markets and themajority of its export demand (more than 50%) comes fromEurope and the US. The current account will thereforeremain under pressure. FDI and tourism receipts should lendsome su ort to the ru ee.
Tourist arrivals increased by 5.5% in the first half of2008.Tourist arrivals increasedto 455 758 compared to432 113 for the same period in 2007. Gross tourismreceipts for the first six months amounted to Rs22 170million, an increase of 12.2% compared to Rs19 752million for the same period in 2007. According to theBoM, tourism receipts for this year will be around 13%higher than last year. Tourist arrivals for the year areestimated to be between 965 000 and 975 000 against903971 last year. Given the construction timeframe ofcurrent hotel projects, the sector should receive asubstantial increase in capacity through 2008 and 2009.The sector continues to play a large role in terms ofattracting FDI and is one of the main drivers of thecountrys economic recovery.
Exchange rates
Source: Bloomberg
Tourism receipts - Rs million
Source: Central Statistics Office
2
4
6
8
10
12
14
2004 2005 2006 2007 2008
2
4
6
810
12
14
2004 2005 2006 2007 2008
Prime rate Bank rateLombard Rate Repo Rate
3.0
3.5
4.0
4.5
5.0
5.5
20
25
30
35
40
45
2004 2005 2006 2007 2008
MUR/USD MUR/Euro MUR/ZAR (rhs)0
10000
20000
30000
40000
50000
60000
2001 2002 2003 2004 2005 2006 2007 2008
8/14/2019 Africa Market Watch - September
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Page 13
Standard Bank Group EconomicsStandard Bank Group Economics
Mauritius picture galleryReal GDP Growth - %
Source: Central Statistics Office
Sectoral contribution to GDP - %
Source: IMF (2006)
Foreign exchange reserves import cover
Source: Central Statistical Office
Trade Balance US$ million
Source: Central Statistical Office
Government finance - % of GDP
Source: IMF
Tourist arrivals - number
Source: Central Statistics Office
Weights of consumer price index (CPI) constituents
Source: Central Statistical Office
Stock Exchange of Mauritius index
Source: Bloomberg
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008
Sugar Non-sugar agriculture
Export-oriented industry Construction
Wholesale & Retail trade Hotels & Restau-rants
Transport, storage & communication Financial Inter-mediation
Others (incl. gov)
0
10
20
30
40
50
0
500
1000
1500
2000
2500
2004 2005 2006 2007 2008
Foreign Reserves Weeks of import cover
-1000
-500
0
500
10001500
2000
2500
3000
2000 2001 2002 2003 2004 2005 2006 2007
Imports Exports Trade balance
-7
-6
-5
-4
-3
-2
-1
0
00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/090
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 2006 2007 2008
10%16%
4%22%5%
13%
9%
4%8% 9%
Clothing, footwear Housing, water, electricity
Health Transport
Communication Furnishings, household
Recreation, culture Education
Restaurants, hotels Miscellaneous goods, services
600
800
1000
1200
1400
1600
1800
2000
2200
2005 2006 2007 2008
8/14/2019 Africa Market Watch - September
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Page 14
Standard Bank Group EconomicsStandard Bank Group Economics
MozambiqueMarginal increase in overall inflation to 10.7% y/y in
September. As projected, non-food inflation accelerated to 4%
y/y in September as the low base effect kicked in. Other than
food, the annualised inflation rates for the transport and
households goods sub-indices accelerated in September.
Although food prices moderated by 0.1% m/m in September, its
annualised inflation rate increased to 16.1% y/y, from 15.7% y/y
in August. The modest decrease in the food price in September is
in our view temporal, especially as the lean season is
approaching implying that food stocks will decline, putting upward
pressure on prices. However, a high base effect in the last quarter
of 2008 is expected to moderate the impact of higher food prices.
Single-digit inflation is thus projected to return in the first quarter
of 2009, when the worst of the lean period, and the festive
season has passed.
The interest rate on the 91-day Treasury bill edged up in
the third quarter. The climb of the interest rate on the
short-term government security to 13.89% in August, after
being flat at 13.5% in the first half of 2008, reflects the
tightening of monetary policy in response to the spurt in
demand for money in the third quarter of 2007. The base
money stock exceeded the September programme target
ceiling in July, on account of strong demand for currency
from buyers acquiring newly harvested cash crops.
However, the spurt in base money was temporal and in
August had fallen to below the end-quarter target. The
approaching festive season is likely to prompt monetary
expansion, as such monetary policy is expected to remain
firm in the short term and thus the policy rate is expected
stabilise over this period.
Inflation - % y/y
Source: Source: Instituto de Nacional Estatistica
Interest rates - %
Source: Banco de Mocambique
The metical holds steady against hard currencies. The
modest 0.7% depreciation of the Mozambican currency againstthe US dollar in September, to MZN24.05/USD, was largely due
to a stronger US dollar. Conversely, the metical strengthened
against the rand, the currency of Mozambiques largest trading
partner, South Africa, and the euro. The sound build up of
international reserves to beyond six months of import cover has
provided resources for the Bank of Mozambique to lean towards
foreign exchange sales to drain liquidity and place less emphasis
on Treasury bill issuances. The subsequent injection of foreign
exchange into the domestic market partly explains the strength of
the metical in recent months. Added to that are the large donor
and foreign direct investment inflows. The metical is projected to
hold steady at present levels over the short term.
Base money fell below target ceiling in August, after
overshooting in July. Strong demand for currency in Julyexplains base moneys breach of the end of September
ceiling target of MZN17 347 million. It expanded by 15.6%
y/y in July and amounted to MZN17 479 million. This growth
spurt was due to the purchase newly harvested cash crops,
including cotton. In August, base money declined by 0.8%
m/m to MZN17 332 million, thus allowing for the monetary
aggregate to fall below the target ceiling. The long weekend
in early September may have spurred higher currency
demand that may have countered the moderation of base
money in August, implying a fair likelihood of a September
breach. The approaching festive season implies a fair
likelihood of monetary expansion in the short term.
Exchange rates
Source: Bloomberg
Money supply
Source: Banco de Mocambique
0
5
10
15
20
25
2004 2005 2006 2007 2008
Overall Food Non-food
5
10
15
20
25
30
2004 2005 2006 2007 2008
Prime Standing lending facility 91 day t-bill
2.8
3.1
3.4
3.7
4.0
4.3
4.6
16
20
24
28
32
36
40
2004 2005 2006 2007 2008MZN/USD MZN/EUR MZN/ZAR (rhs)
5
10
15
20
25
30
35
2004 2005 2006 2007 2008
M2 Base money
8/14/2019 Africa Market Watch - September
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Page 15
Standard Bank Group EconomicsStandard Bank Group Economics
Mozambique picture galleryReal GDP growth - %
Source: Banco de Mocambique
Sectoral contribution to GDP - %
Source: Source: Instituto de Nacional Estatistica
Gross foreign reserves & import cover
Source: Banco de Mocambique, Standard Bank est.
Trade balance US$ million
Source: Banco de Mocambique
Government deficit - % of GDP
Source: IMF CR. No 08/220
Aluminium price US$ per metric tonne
Source: IMF
Weights of consumer price index (CPI) constituents
Source: Instituto de Nacional Estatistica
Capital account
US$ million
Source: IMF
7.58.4 8.7
7.0 7.07.7
0
2
4
6
8
10
2004 2005 2006 2007 2008p 2009f
Agriculture,animal
production,hunting &
forestry, 24%
Fishing,2%
Extractiveindustries,1%
Manufacturing, 15%
Electricityand water,
6%
Construction,4%
Commerce,11%
Hotels andrestaurants,
2%
Transports,storage &
communications, 10%
Financial
activities, 6%
Real estateactivities &business
services, 9% Communityservices, 7%
Education,4%
2
4
6
8
10
0
400
800
1200
1600
2000
2004 2005 2006 2007 2008
Foreign reserves Import cover
-300
-150
0
150
300
450
600
750
900
2004 2005 2006 2007 2008
Exports Imports Deficit
-7
-6
-5
-4
-3
-2
-1
0
2003 2004 2005 2006 2007 2008p1500
1900
2300
2700
3100
3500
2004 2005 2006 2007 2008
52%
13%10%
5%
5%
3%3%
2%
2%2%2%
1%
Food & non-alcohol ic drinks Dwellings,water,elec., gas & fuels
Transport Mobile dwellings, hhold equip. & main.
Clothes & footwear Health
Leisure, recreation & culture Communications
Alcohol & tobacco Restaurants & hotels
Miscellaneous Education
-2500
-2000
-1500
-1000
-500
0
500
1000
1500
2006 2007 2008p 2009p 2010p
Foreign borrowing Amortisation Direct investment
8/14/2019 Africa Market Watch - September
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Page 16
Standard Bank Group EconomicsStandard Bank Group Economics
Namibia
Inflation may have peaked. As 85% of Namibias goods and
services are sourced from South Africa, inflation is largely
imported. This year inflation rose from 7.8% y/y in January to
12% y/y in August. Inflation is mainly driven by the escalation in
food and energy prices. The food group has the largest weight in
the overall consumer price index at 29.6%. Food inflation rosefrom 15% y/y in January to 18.8% y/y in July, but eased to 18.3%
y/y in August. Food prices may have peaked which suggests
overall inflation could ease. However, transport inflation (weight
14.8%) remained high at 18.1% y/y in July and August. South
Africas producer price inflation is an important leading indicator
of Namibias inflation rate and rose by 19.1% y/y in August.
Although high it is expected to ease in coming months.
Monetary Policy Committee keeps policy rate flat.
Namibias policy stance is closely linked to that of the South
African Reserve Banks (SARB) through membership of the
Common Monetary Area (CMA). Namibias monetary policy
focuses on maintaining the Namibian dollars peg to the
South African rand at par by holding adequate foreignexchange reserves. Namibias interest rates have remained
unchanged this year, whereas the SARB hiked rates in April
and June. Namibias policy or bank rate is 10.5% and the
prime rate is 15.25%. The Central Bank of Namibia (BoN) no
longer meets on the same day as the SARB. Interest rates
have started to diverge from South Africas, signalling some
degree of policy independence.
Inflation - % y/y
Source: Bank of Namibia
Interest rates - %
Source: Bank of Namibia
The Namibian dollar is under pressure to depreciate. The
Namibian dollar (NAD) is pegged to the South African rand
(ZAR) at 1:1. Several factors are affecting the exchange rate,such as South Africas large trade and current account deficits,
emerging markets jitters and global uncertainty from the sub-
prime debacle, and are exposing the rand to further weakness.
The weaker exchange rate could help boost the export sector,
but equally could underpin imported inflation. Greater exchange
rate uncertainty and volatility can be expected. The projected
exchange rates for the rand/Namibian dollar exchange rate to the
US dollar are: NAD8.05/USD in Q4 2008; NAD8.17/USD in Q1
2009 and NAD8.12 in Q2 2009. The 12-month trading range is
NAD7.30 to NAD8.50 to the US dollar.
Diamond minings contribution to GDP declining. The
important diamond mining contributed 5.9% of GDP in 2007,
below the high of over 10.4% in 2002. The sectorcontributed an average of 8.3% to GDP from 2000 to 2007.
Diamond mining output amounted to N$3.11 billion in 2007,
marginally below N$4.05 billion in 2006. The sectors growth
is erratic: between 2002 and 2007 it grew by 17.3%, -3.5%,
38.6%, -3.4%, 25.2% and -0.3% respectively in real terms.
The mining and quarrying sector as a whole also exhibited
volatility. Diamond prices, as measured by the Antwerp
Diamond Index, surged to 171.7 in June this year (the latest
available) from 140.9 a year earlier, after being relatively
stable in 2006 (see Botswana Picture Gallery).
Exchange rate - NAD/USD
Source: Bloomberg
Diamond mining
Source: Bank of Namibia
-4
0
4
8
1216
20
2004 2005 2006 2007 2008
CPI Food
4
8
12
16
20
2002 2003 2004 2005 2006 2007 2008
Prime rate Ban k rate 91-d ay TB
5
6
7
8
9
10
11
12
00 01 02 03 04 05 06 07 08
2%
4%
6%
8%
10%
12%
0.0
1.0
2.0
3.0
4.0
5.0
00 01 02 03 04 05 06 07
Diamond mining (lh) % of GDP (rh)
N$ billion %
8/14/2019 Africa Market Watch - September
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Page 17
Standard Bank Group EconomicsStandard Bank Group Economics
Namibia picture gallery
Real GDP growth
Source: IMF
Sectoral contribution to GDP - %
Source: Bank of Namibia
Foreign exchange reserves
Source: Bloomberg, Bank of Namibia
Trade balance - N$ billion
Source: Bank of Namibia
Government budget balance (incl. grants) - % of GDP
Source: IMF
Fishing industry
Source: Bank of Namibia
Weights of consumer price index (CPI) constituents
Source:Bank of Namibia
Namibia Stock Exchange index
Source: Bloomberg
3.5
2.4
6.7
3.5
6.6
4.8
4.1
4.4 4.74.5
0
2
4
6
8
00 01 02 03 04 05 06 07 08f 09f
Agriculture &forestry
5.7%
Fishing4.2%
Mining &quarrying
8.3%
Other15.1%
Manufacturing
12.6%
Otherservices35.5%
Governmentservices
18.6%
0
1
2
3
4
5
6
7
0
200
400
600
800
1,000
1,200
1,400
2004 2005 2006 2007 2008
MonthsUS$ mn
Reserves ( lh) Import cover ( rh)
-5
0
5
10
15
20
25
2002 2003 2004 2005 2006p 2007p
Exp orts Imp orts Trad e balan ce
-8
-6
-4
-2
0
2
4
03/04 04/05 05/06e 06/07 07/08p
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
0.0
0.5
1.0
1.5
2.0
2.5
00 01 02 03 04 05 06 07
Fishing on board (lh) % of GDP (rh)
N$ billion %
30%
21%15%
7%
7%
20%
Food & non-alc. bev. Housing, water, electricity
Transport Education
Misc. goods & services Other
200
300400500600
700800900
1,000
1,100
2002 2003 2004 2005 2006 2007 2008
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Page 18
Standard Bank Group EconomicsStandard Bank Group Economics
Nigeria
Risk to inflation remains high. Headline inflation declined from
14% y/y in July to 12.4% y/y in August 2008 driven by a decline
in food prices. Food prices (which account for about 64% of the
CPI basket) declined from an average of 20.9% y/y to an
average of 18.8% over the same period. Despite headline
inflation remaining in double digits, core inflation (headlineinflation, excluding food) declined from an average of 4.8% y/y in
July to an average of 3.9% y/y in August 2008. We expect the
improvement in agricultural production to ease food supply
problems thereby reducing food prices through 2008. Significant
growth in broad money, M2, mostly fuelled by rising private
sector credit growth continues to pose an upward risk to
inflation. We have revised our inflation forecast upwards to
average 10.7% in 2008.
Monetary policy rate (MPR) reduced by 50 basis points.
As core inflation remains in single digits, the central bank
continues to divert its focus to liquidity management to avert
the long-term inflationary pressures from fiscal expansion
and high inflows of oil revenue rather than fight the short-
term inflationary impact of rising food prices. Following anemergency monetary policy committee meeting on 18
September, the MPR was reduced from 10.25% to 9.75% in
an attempt to address liquidity shortages in the system.
However, excess liquidity from fiscal expansion and rapid
private sector credit extension, which is driving high money
supply growth, continues to pose major interest rate risks.
Overall, we expect monetary policy to remain restrictive
through 2008.
Inflation - % y/y
Source: National Bureau of Statistics
Interest rates - %
Source: Central Bank of Nigeria
Naira exchange rate remains relatively strong. The central
bank continues to uphold its strong stance of a strong and stableexchange rate. The exchange rate continues to trade within a
narrow range fluctuating around NGN117 per US dollar. A strong
naira should also help curb the high import bill, especially from
food and energy. Due to high oil revenues and fiscal expansion,
we expect the monetary authority to remain active in the forex
market. This should help reduce the surge in money supply and
be an effective way of managing excess liquidity that is posing
significant long-term risks to inflation. We expect the naira to
remain relatively strong and to average NGN116.50 per US dollar
in the fourth quarter of 2008.
Non-oil sector continue to drive economic growth. First
quarter GDP growth was revised downwards from 6.5% to5.5%. The economy grew by 6.7% in the second quarter of
2008 mainly driven by 8.5% growth in the non-oil sector.
Non-oil sector growth was driven by strong agriculture
performance following favourable weather conditions and
high prices of agriculture products that increased by between
16% and 40% for the nine monitored agriculture
commodities. The unrest in the Niger Delta area continues to
constrain oil production thereby leading to slowdown in the
oil sector growth. The manufacturing sector contracted by
2.2% in the second quarter due to poor electricity supply.
Overall, we expect GDP growth to remain strong in 2008 due
to strong performance in the non-oil sector.
Exchange rates
Source: Bloomberg & Federal Ministry of Finance
Real sectoral GDP growth - %
Source: National Bureau of Statistics
-20
-10
0
10
20
30
40
2005 2006 2007 2008CPI inflation CPI ex foodCPI ex food & energy Transport
9.75
0
4
8
12
16
20
2005 2006 2007 2008
Policy rate Prime 91-day TB
115
120
125
130
135
2006 2007 2008Naira/US$ Budget exchange rate (Naira/US$)
-10
-5
0
5
10
15
20
25
2003 2004 2005 2006 2007 2008f 2009f
Real GDP Oil GDP Non-oil GDP
8/14/2019 Africa Market Watch - September
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Standard Bank Group EconomicsStandard Bank Group Economics
Nigeria picture gallery
Real GDP growth - %
Source: NBS
Sectoral contribution to GDP - %
Source: NBS
Foreign exchange reserves US$ million
Source: Bloomberg
Trade account
Source: IIMF
Government surplus - % of GDP
Source: IMF
Oil production and prices
Source: International Energy Agency
Weights of consumer price index (CPI) constituents
Source: NBS
Nigerian stock exchange
All share index
Source: Bloomberg
10.3 10.6
5.4 6.26.4
9.48.6
0
2
4
6
8
10
12
2003 2004 2005 2006 2007 2008f 2009f
Agriculture,42.2
Oil & gas,19.4
Building &construction,
1.7
Finance &insurance,
3.9
Wholesale &retail trade,
16.2
Manufacturing, 4.0
Telecommunication, 2.3
0
10000
20000
30000
40000
50000
60000
70000
2003 2004 2005 2006 2007 2008
-60
-40
-20
0
20
4060
80
100
2004 2005 2006 2007 2008f
Exports Imports Trade surplus
-10
0
10
20
30
2003 2004 2005 2006 2007 2008f
Overall balance (cash basis) Revenue Expenditure
20
40
60
80
100
120
140160
-
0.5
1.0
1.5
2.0
2.5
3.03.5
2005 2006 2007 2008
US$/barrelmillion bpd
Total productionBonny Light spot price (RHS)
64%
18%4%
4%
3%
2%5%
Food & non-alcohol ic bev. Hse water, elec, gas & other fuel
Transport Furn & hshld equip maint
Clothing & footwear Alcohol, tobacco & kola
Other
10000
20000
30000
40000
50000
60000
70000
2003 2004 2005 2006 2007 2008
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Page 20
Standard Bank Group EconomicsStandard Bank Group Economics
Swaziland
High food and transport prices driving inflation. Inflation is
largely imported from South Africa through close trade links.
Almost 90% of Swazilands imports are sourced from South
Africa. Swazilands inflation averaged 14.7% y/y in August,
above 13.3% y/y in July. Although food inflation data is not
readily available, it can be assumed that food prices followSouth African trends. Swaziland has rebased its CPI in April
2007; the food groups weight rose from 25.3% to 37.7% and the
transport groups from 7.9% to 8.6% in the index. The greater
weights of these two important groups, which both experienced
price surges, are more reason why inflation is at these high
levels. South Africas inflation rate is expected to peak in the
next few months, which should bring some relief.
Interest rates linked to South Africas. Swazilands
monetary policy focuses mainly on maintaining its 1:1
currency peg to the rand by holding adequate foreign
exchange reserves. The Common Monetary Area rules limit
Swazilands policy independence and policy is effectively
imported from South Africa. The Central Bank of Swazilanddid not raise its discount rate in June when the SARB raised
the repo rate to 12%, keeping the discount rate at 11.5%. In
the 2008 MPC statement, the committee argued that a less
restrictive policy may be followed to avoid stifling economic
growth and encourage the agricultural sector, helping to
offset imported food price pressures. Also, higher local
interest rates do not affect prices determined internationally.
Inflation - % y/y
Source: Central Bank of Swaziland
Interest rates - %
Source: Central Bank of Swaziland
Depreciation in the offing. The lilangeni is pegged at par to the
South African rand under the CMA agreement. The rand is legal
tender in Swaziland, but not vice versa. Economic conditions inSwaziland do not affect the exchange rate of the ZAR, only
South African and global economic conditions. The SZL/ZAR is
expected to trade at an average of SZL8.05/USD in the fourth
quarter of 2008 and SZL7.78/USD for the whole of 2008;
SZL8.17/USD in the first quarter and SZL8.12/USD in the
second quarter of 2009; and SZL7.97/USD for 2009. The 12-
month trading range is SZL7.30-8.5/USD. However, South
Africas large trade and current account deficits, emerging
markets jitters and global uncertainty from the sub-prime
debacle expose the rand to further weakness.
Sugar production. Sugar is the backbone of the economy,
but recent changes in the global trade regime has meant
that the industry will suffer. European Union sugar pricescontinue to fall. Sugar production is also vulnerable to
weather conditions, particularly water for irrigation. Sugar
production has been relatively stable between 2004/05
(597 563 MT) and 2007/08 (631 236 MT), despite being
lower than in 2005/06 (652 735 MT). About half the
production is sold domestically. The value of exports,
however, has risen from E758.4 million to E1 126.0 million
over the same period. Export earnings were boosted by the
weaker exchange rate, but a lower international sugar price
dampened earnings (see the picture gallery below).
Exchange rates
SZL/USD
Source: Bloomberg
Sugar production
Source: Central Bank of Swaziland
0
2
4
6
8
10
12
14
16
2002 2003 2004 2005 2006 2007 2008
4
6
8
10
12
14
16
18
2002 2003 2004 2005 2006 2007 2008
Prime rate Discount rate TB rate
5
6
7
8
9
10
11
12
00 01 02 03 04 05 06 07 08
0
200
400
600
800
1,000
1,200
550
575
600
625
650
675
700
04/05 05/06 06/07 07/08
E millio nMT '000
Production Value of exports
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Page 21
Standard Bank Group EconomicsStandard Bank Group Economics
Swaziland picture gallery
Real GDP growth - %
Source: IMF
Sectoral contribution to GDP - %
Source: IMF
Foreign exchange reserves
Source: Bloomberg
Trade balance US$ million
Source: Bloomberg
Government budget balance - % of GDP, including grants
Source: IMF
Sugar prices international - Sugar No. 11 contract US$/lb
Source: Bloomberg
Weights of consumer price index (CPI) constituents
Source: IMF
Capital account
US$ million
Source: IMF
2.0
1.0
1.8
3.9
2.5 2.2
2.8
2.4
2.0 2.0
0
1
2
3
4
00 01 02 03 04 05 06 07 08f 09fAgriculture
12.1%
Manufacturing
32.0%
Construction3.7%
Services49.7%
Other2.5%
0
1
2
3
4
5
6
100200300400500600700800
9001000
2004 2005 2006 2007 2008
MonthsUS$ mn
Gross reserves Import cover
-500
0
500
1,000
1,500
2,000
2,500
2002 2003 2004 2005 2006e 2007p
Trade balance Exports Imports
-6
-4
-2
0
2
4
6
8
1012
03/04 04/05 05/06 06/07 07/08p 08/09p
0
4
8
12
16
20
95 96 97 98 99 00 01 02 03 04 05 06 07 08
Food37.73%Housing
14.33%
Clothing6.16%
Furniture11.88%
Transport8.60%
Health3.58%
Education5.38% Other
12.34%
-400
-200
0
200
400
2002 2003 2004 2005 2006e 2007p
Trade balance Current accountCapital & financial account
8/14/2019 Africa Market Watch - September
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Page 22
Standard Bank Group EconomicsStandard Bank Group Economics
Tanzania
Second round effects of high oil prices. Headline inflation
increased from 9.5% y/y in July to 9.8% y/y in August mostly
driven by high energy and transport costs. The food component
(which constitutes about 55.9% of the consumer price index
CPI- basket) declined marginally from 11.2% y/y in July to 11.1%
y/y in August as the country enters the harvest period. Energyprices (which constitute about 8.5% of the CPI basket) increased
from 12% y/y in July to 12.7% y/y in August as the country
continues to import its full quota of oil. Second-round effects of
high energy prices are now evident as transport costs increased
from 5.5% y/y in July to 9.9% y/y in August. Thus we expect
softer oil prices and increased food supply to bring some relief
through 2008. We have revised our inflation forecast downwards
to average 9.5% in 2008.
Upside risk to interest rates. The declining interest rates
environment experienced since November 2007 seems to be
fading. Having declined from a high of 15.14% in October
2007 to 4.95% in May 2008, the 91-day Treasury bill (T-bill)
rate increased to 8.62% in August 2008. As developments in
T-bill yields continue to provide an anchor for market-determined interest rates, the yields for all maturities have
started increasing as well. The overall weighted average T-
bill rate also increased from a low of 7% in May to 9.47% in
August 2008. The high inflation environment should lead to
an increase in nominal lending rates through 2008, which
should help to maintain stable real interest rates. Overall, the
risks to interest rates are on the upside. We forecast the
end-year T-bill rate to reach 11.4%.
Inflation - % y/y
Source: National Bureau of Statistics
Interest rates - %
Source: Bank of Tanzania
The shilling exchange rate to strengthen through 2008. As
the country enters the agriculture harvest period, we expect thecurrency to strengthen throughout the remainder of the year.
Export performance continues to determine fluctuations in the
exchange rate as the economy is heavily dependent on the
agriculture and commodity sectors. Increased demand for tourism
services and continued inflow of donor aid should also support a
strong currency. As the boom in the world commodity market
continues, this should further improve mining exports thereby
strengthening the currency. The shilling appreciated from an
average of TZS1 160.33 per US dollar in
August to an average of TZS1 159.16 per US dollar in September
2008.
Tourism leading the export sector improvements.
Tanzanias economy depends heavily on the agriculture,commodity and tourism sectors. Trade, hotels and
restaurants (accounting for about 25% of the countrys forex
earnings) should continue to grow as tourism remains
strong. The low-cost high volume tourism strategy continues
to attract more visitors into the country, thereby generating
more revenue. Travel receipts, of which tourism is 80%,
dominates the export sector followed by gold receipts.
Infrastructural bottlenecks will have to be addressed if the
tourism sector is to reach its full potential. Following the
aggressive marketing drive by the tourism authorities, we
expect a continued increase in tourism services in the
medium term.
Exchange rates
Source: Bank of Tanzania
Exports (year ending May) US$ million
Source: Bank of Tanzania
0
3
6
9
12
15
2005 2006 2007 2008
Overall Non-food Food
0
5
10
15
20
25
2005 2006 2007 2008
Central Bank RateComm.Bank Lending RateTreasury Bills
0
40
80
120
160
200
240
1050
1100
1150
1200
1250
1300
1350
2005 2006 2007 2008
Volume of transactions (US$ millions) RHSExchange rate (TZS per USD)
TZS per USD Millions of US$
0
200
400
600
800
1000
1200
Travel Gold Traditional
exports
Manufactured
exports2005 2006 2007 2008
8/14/2019 Africa Market Watch - September
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Page 23
Standard Bank Group EconomicsStandard Bank Group Economics
Tanzania picture gallery
Real GDP growth - %
Source: National Bureau of Statistics
Sectoral contribution to GDP - %
Source: National Bureau of Statistics
Foreign exchange reserves, import cover
Source: Bank of Tanzania
Trade account US$ million
Source: Bank of Tanzania
Government deficit % of GDP
Source: Bank of Tanzania & IMF
Services receipts year ending May - US$ million
Source: Bank of Tanzania
Weights in consumer price index (CPI) constituents
Source: National Bureau of Statistics
Capital account - US$ million
Source: Bank of Tanzania
7.2 6.97.8
7.46.7
7.17.8 8.1
0
2
4
6
8
10
2002 2003 2004 2005 2006 2007 2008f 2009f
44.7%
17.5% 5.4%9.2%
6.9%5.4%
5.8%
1.5%
3.8%
4.1%
Agriculture Trade, Hotels & Restaurants
Financial & Business Services Manufacturing
Public Admin. Transport & Comm.
Construction Electricity and water supply
Mining and quarrying Owner occupied dwellings
2
3
4
5
67
8
0
500
1000
1500
20002500
3000
2000 2001 2002 2003 2004 2005 2006 2007e
months
Gross reserves Import cover (rhs)
US$ millions
-6000-5000-4000-3000-2000-1000
0100020003000
2000 2001 2002 2003 2004 2005 2006 2007e
Exports Imports Trade deficit
-7
-6
-5
-4
-3
-2
-1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008f
0
200
400
600
800
1000
1200
Transportation Travel (Tourism) Other Services
2004 2005 2006 2007 2008
55.9%
6.9% 6.4% 1.4%
8.5% 2.1%
2.1%
2.1%
0.8%
9.7%
2.6%
1.5%Food Drinks and Tobacco
Clothing and Footwear Rents
Fuel, Power and Water Furniture & Household Equipment
Household Operations&Maintenance Personal Care & Health
Recreation & Entertainment Transportation
Education Miscellaneous Goods and Services
0
1000
2000
3000
4000
5000
6000
2000 2001 2002 2003 2004 2005 2006 2007e
8/14/2019 Africa Market Watch - September
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Page 24
Standard Bank Group EconomicsStandard Bank Group Economics
Uganda
Overall inflation subdued by slowing food inflation. Overall
inflation slowed to 15.2% y/y in September from 15.8% y/y in
August on the back of a deceleration in food inflation to 30.7% y/y
from 33.6% y/y. Nevertheless, food prices are expected to remain
high because despite favourable domestic production, demand
from neighbouring countries, including Kenya, is projected todeplete food stocks and thus maintain upward pressure on food
prices in the short term. The softening of the international oil price
is expected to reduce the inflationary pressures stemming from
the transport and fuel sub-indices. Nevertheless, overall inflation
is projected to remain stubbornly high for longer and persist until
the second quarter of 2009.
Central bank governor signals lower interest rates. The
Bank of Ugandas outlook for inflation is positive and the
governor suggested in September that there were grounds
to cut interest rates, especially as the inflationary pressures
are exogenous. Following the suspension of Treasury bill
auctions in July, which prompted a spike in the 91-dayTreasury bill yield of 9.1%, the yield eased to 8.6% at the
end of September. The rediscount rate was higher in the
third quarter of 2008 than it was in the first half of the year,
implying a tightening of monetary policy as liquidity
increased. This reflects the upward pressure of sterilisation
on interest rates, mainly through debt issuances.
Inflation - % y/y
Source: Uganda Bureau of Statistics
Interest rates - %
Source: Bank of Uganda
The shilling stabilises. The 1.4% depreciation of the Ugandan
currency against the US dollar in September, compared to
August, to UGX1 646.27/USD, in relation to its appreciationagainst the rand and the euro reflects the effect of a stronger US
dollar. The Ugandan shilling has benefited from large inflows of
foreign exchange due to sound export earnings, capital inflows
and aid. The Bank of Ugandas preference for foreign exchange
sales for open market operations, made possible by the prudent
accumulation of international reserves to about six months of
import cover, has also boosted the value of the shilling. The
moderation of the oil price is likely to ease pressure on the
current account, which is shilling friendly. The risk to the shilling
is investors increasing risk aversion to emerging market assets.
Large foreign exchange inflows raise liquidity. Strong
foreign exchange inflows due to growing capital inflows and
buoyant export revenue have proven a challenge for theauthorities to sterilise, hence the breaching of the indicative
target on base money at the end of 2007 and end of March
2008. The acceleration of money supply growth over the
past two years from the teens to the 20-30% range on an
annual basis is testimony to these increasing inflows. To
accommodate the permanent effect on the level of food and
fuel prices, the base money target for June 2008 was
upwardly adjusted. To subdue second-round effects, the
authorities have based their target for June 2009 on a
conservative core inflation projection of 5%.
Exchange rates
Source: Bloomberg, Standard Bank est.
Money supply growth - % y/y
Source: Bank of Uganda
0
3
6
9
12
15
18
2005 2006 2007 2008
Overall Core (excl. food, fuel, electricity and utilities)
0
4
8
12
16
20
24
28
2004 2005 2006 2007 200891 Day TB (yield)Weighted average lendingRediscount
0
60
120
180
240
300
360
1500
1700
1900
2100
2300
2500
2700
2004 2005 2006 2007 2008
UGX/USD UGX/EUR UGX/ZAR (rhs)
0
10
20
30
40
50
2004 2005 2006 2007 2008
M3 (Broad money) Base money
8/14/2019 Africa Market Watch - September
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Page 25
Standard Bank Group EconomicsStandard Bank Group Economics
Uganda - picture gallery
Real GDP growth - %
Source: Uganda Bureau of Statistics, IMF, Standard Bank est.
Sectoral contribution to GDP - %
Source: Uganda Bureau of Statistics
Foreign exchange reserves import cover
Source: Bank of Uganda, Bloomberg
Trade account US$ million
Source: Bank of Uganda
Government budget deficit - % of GDP
Source: IMF CR No. 08/236
Coffee prices US cents per pound
Source: IMF
Weights of consumer price index (CPI) constituents
Source: Uganda Bureau of Statistics
Capital and financial account US$ million
Source: IMF CR No. 08/236
6.6
8.69.4 8.9 9.1 9.2
0
2
4
6
8
10
2004 2005 2006 2007e 2008p 2009f
Agriculture30%
Mining andquarrying
1%
Manufacturing
9%
Electricityand water
1%
Construction11%
Wholesale &Retail Trade
11%
Hotels &Restaurants
3%
Transport &communicati
on10%
Communityservices
24%
4.5
5.0
5.5
6.0
6.5
7.0
7.5
0
500
1000
1500
2000
2500
3000
2004 2005 2006 2007 2008
Forex reserves Import cover (rhs)
US$ million months
-540
-450
-360
-270
-180
-90
0
0
200
400
600
800
1000
1200
2005 2006 2007 2008
Exports Imports Trade balance (rhs)
-4
-3
-2
-1
0
1
2005/06 2006/07 2007/08 2008/09p
0
40
80
120
160
200
2004 2005 2006 2007 2008
Robusta price (rhs) Arabica price (rhs)
27.2%
4.7%
4.4%
14.8%4.5%
12.8%
14.7%16.8%
Food
Beverages and tobacco
Clothing and footwear
Rent, fuel and utilities
Household and personal goods
Transport and communication
Education
-3000
-2000
-1000
0
1000
2000
3000
4000
Capitalaccount(MDRI)
FDI andportfolio
investment
Otherinvestment
Short-terminvestment
2005/06 2006/07 2007/08 2008/09p
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Page 26
Standard Bank Group EconomicsStandard Bank Group Economics
ZambiaInflation accelerates to 14.2% y/y in September. The persistent
incline of inflation from 13.2% y/y in August was due to food, fuel
and transport prices. Food inflation remained steady at 16.2% y/y
in September. However, the rent, fuel and lighting sub-indexs
inflation accelerated to 17.7% y/y from 14.5% y/y, while the
transport and communication sub-indexs inflation surged to
11.5% y/y from 5.3% y/y. The price of fuel is very high and feeds
into transport costs and final goods and services. To ease the
pressure of high fuel prices on production and inflation, the
authorities cut import tariffs on diesel and petrol to 7% and 36%
from 15% and 45% respectively. This is projected to ease fuel
prices and transport costs; however, the approaching lean
season will keep food prices elevated in the short term.
Interest rates edge up. Uncertainty surrounding Zambias
imminent presidential elections, the global financial turmoil
and high inflation contributed to the increase in short-term
interest rates in September. In recent years, yields on
Treasury instruments have been largely influenced by
portfolio capital inflows. Over the past year, portfolio
investors have sought longer dated instruments, thus easing
the downward pressure on yields. However, in the second
half of 2008 these flows slowed, hence the increase in the
yield on the 91-day Treasury bill to 12.5% in September
from 10.9% in March. Even the sticky lending rate edged up
to 25.6% in September. Interest rates are expected to
moderate over the short term as uncertainty recedes.
Inflation - % y/y
Source: National Bureau of Statistics
Interest rates - %
Source: Bank of Zambia
Kwacha weakened by pre-election jitters and a softer copper
price. The Zambian currency depreciated against three hard
currencies, namely the US dollar, euro and rand, in September.The kwachas loss in value is due to a slowdown in portfolio
capital inflows on account of uncertainty surrounding domestic
events, turmoil in global financial markets and the 15.4% m/m
drop in the copper price to USD6 388 per tonne at the end of
September. Accelerating inflation has also aggravated the value
of the kwacha, as the inflation differential with that of its trade
partners widens thus spurring a weaker currency. A stable
kwacha is projected in the short term on the grounds that policy
continuity is all but assured under new leadership. Although the
copper price has softened it is not expected to fall off.
M3 growth slows on the back of softening growth of
foreign currency deposits. The slowdown in the growth
rate of broad money (M3) to 29.2% y/y in July from 34.6%y/y in January is reflective of a significant deceleration in the
growth of the foreign currency deposits constituent of broad
money to 10.1% y/y in August from 57.3% y/y in January.
The weakness of the US dollar in the first half of the year
and relatively lower appetite for Zambian debt partly explains
this years decline in foreign currency deposits. Reserve
moneys cumulative increase target of ZMK22 billion was
met in June 2008; however, at the end of August, the ceiling
target for September was exceeded by ZMK127 billion, likely
due to the challenge of fully sterilising net purchases of
foreign exchange.
Exchange rates
Source: Bloomberg, Standard Bank Group est.
Money supply growth % y/y
Source: Bank of Zambia
-5
0
5
10
15
20
25
2004 2005 2006 2007 2008
Overall Food Non-food
0
10
20
30
40
50
2004 2005 2006 2007 2008
Average lending rate BoZ rate 91-Day TB
0
150
300
450
600
750
900
3000
3600
4200
4800
5400
6000
6600
2004 2005 2006 2007 2008
ZMK/USD ZMK/EUR ZMK/ZAR (rhs)
-10
0
10
20
30
40
50
2004 2005 2006 2007 2008
Broad money (M3) Reserve money.
8/14/2019 Africa Market Watch - September
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Page 27
Standard Bank Group EconomicsStandard Bank Group Economics
Zambia picture galleryReal GDP growth - %
Source: IMF, Standard Bank est.
Sectoral contribution to GDP - %
Source: Central Statistical Office
Foreign reserves & import cover
Source: Bloomberg, Bank of Zambia
Trade account US$ million
Source: Central Statistics Office
Government budget balance - % of GDP
Source: IMF CR No 08/187
Copper prices US$ per tonne
Source: Bank of Zambia
Weights of consumer price index (CPI) constituents
Source: Central Statistical Office, Standard Bank Group est.
Stock market indicators
Source: Lusaka Stock Exchange
5.4 5.26.2 5.7 6.1 6.2
0
1
2
34
5
6
7
2004 2005 2006 2007e 2008f 2009f
Agriculture,Forestry &
Fishing13%
Mining &Quarrying
8%Manufacturi
ng11%
Electricity,Gas &Water
3%
Construction
11%
Wholesale& Retail
trade18%
Restaurants, Bars &Hotels
3%
Transport,Storage &
Communications9%
FinancialInstitutions& Insurance
7%
Real Estate& Business
services9%
Community,Social &PersonalServices
8%
1.5
2.0
2.5
3.0
3.5
4.0
0
300
600
900
1200
1500
2004 2005 2006 2007 2008
Forex reserves (US$ millions)months of import cover
-300
0
300
600
900
1200
1500
2005 2006 2007 2008
Imports Exports Trade balance
-4
0
4
8
12
16
20
2005 2006 2007 2008p 2009f
0
100
200
300
400
500
2004 2005 2006 2007 2008
57.1
6.8
8.5
8.2
0.8 9.64.9
4.1
Food & beverage Clothing & footwearRent, fuel, lighting Furniture & household goodsMedical care Transport & communicationRecreation & education Other goods & services
6000
8000
10000
12000
14000
16000
18000
20000
22000
0
500
1000
1500
2000
2500
3000
3500
4000
2005 2006 2007 2008
LuSE All Share Index (Jan 1997=100)
Market Capitalisation (rhs)
ZMK billions
8/14/2019 Africa Market Watch - September
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Page 28
Standard Bank Group EconomicsStandard Bank Group Economics
ZimbabweHyperinflation environment remains a major challenge. Lack
of foreign exchange, shortages of goods and services and a
resultant increase in food prices, high global energy prices,
sharp depreciation of the currency and rapid growth of money
supply continue to drive inflation to new record highs. The
government continue to print money to finance quasi fiscal
spending and that is also fuelling the hyperinflation environment.
However, in the absence of any official inflation and monetary
survey data, it remains difficult to quantify the extent of the
countrys economic crisis. Also, in the absence of substantial
productive activities, hyperinflation will continue. The last official
inflation recorded for June 2008 was 11.2 million per cent.
Monetary policy remains restrictive and ineffective.
Continued depreciation of the currency and the
hyperinflation environment remains a major challenge for
the monetary authorities to conduct monetary policy
effectively. Secured overnight accommodation rate remains
unchanged at 8500%. This tight monetary policy
environment has completely crowded out any meaningful
economic activity, as access to credit is severely limited.
The central bank continues to maintain stringent statutory
reserve requirements that impose a heavy administrative
burden on commercial banks. Commercial banks lending
remains unprofitable. Overall, real lending rates remain
deeply in negative territory and this should escalate the
hyperinflation environment.
Inflation - % y/y
Source: Reserve Bank of Zimbabwe
Interest rates - %
Source: Reserve Bank of Zimbabwe
Depreciating currency. Since the redenomination of the
currency by a factor of 1:10 000 000 000 on 1 August 2008, the
Zimbabwe dollar continues to depreciate significantly. The official
interbank exchange rate depreciated from Z$7.78 per US dollar
on 1 August 2008 to Z$132.30 per US dollar on 30 September
2008. The parallel exchange rate was Z$750 000 per US dollar
on 30 September 2008. Even with the recent political settlement,
foreign exchange management will continue to be a major
challenge to all the efforts to institute any meaningful economic
reforms. Continued shortages of foreign exchange should lead to
a further depreciation of the currency.
Sectoral performance remains dismal. Overall, we expect
the economy to contract by about 7% in 2008 as most
sectors continue to operate below capacity. The countrys
inability to secure essential raw materials, machinery and
equipment should continue to fuel the slump in production in
most sectors of the economy. The agricultural sector
continues to perform dismally. Because the sector has been
the largest purchaser of goods and services (for example,
manufactured products) and the anchor around which
industries and services developed, its poor performance
continues to hinder developments of other sectors.
Exchange rates Z$ per US dollar
Source: Bloomberg
Manufacturing output index - 1990=100
Source: IMF
0
2000000
4000000
6000000
8000000
10000000
12000000
2006 2007 2008
3000
8500
66.30
2000
4000
6000
8000
10000
2005 2006 2007 2008
Prime lending rateOvernight accommodation (secured)91-day T-bill