Economic Analysis - BMI Vs Consensus: Bullish On Angolan Growth And Ghanaian Cedi - NOV 2017

This month, we assess our forecasts for 2018. We hold a comparably bullish outlook for Angolan growth, as we believe that consensus has not taken into account a temporary uptick in oil production. Our forecast for the Ghanaian cedi is also above consensus, as we believe that a significant boost to the current account will increase demand for the currency. Meanwhile, we expect the South African Reserve Bank (SARB) to keep rates on hold in order to keep the rand stable, given that a mild uptick in growth will limit impetus for easing.

Above Consensus Angola Growth: Our forecast for Angolan growth in 2018 stands markedly above consensus, at 4.1% y-o-y compared to 2.0%. This will mostly be driven by a short-term uptick in oil production as Total's Kaombo field is set to come online, boosting output by 230,000 barrels per day and amounting to a 7.0% y-o-y boost and leading to a greater volume of oil exports. Greater earnings will also improve access to foreign currency, stabilising the parallel exchange rate and improving the purchasing power of consumers. However, we note that this development will be transitory, and oil production will resume its declining trend by 2019, meaning that the uptick in growth will be short-lived.

Above Consensus Ghanaian Cedi: Our bullish view on the cedi is predicated on the country's high real interest rate and our forecasts for a significant uptick in oil output. In the coming months, the interest rate-inflation differential will remain high despite gradual monetary easing, and terms of trade are set to improve. A 60.0% ramp-up in oil production in 2018 will turn Ghana's balance of trade positive, representing a significant structural shift for the Ghanaian economy. Additionally, we forecast narrowing fiscal deficits owing to the government's ongoing adherence to an IMF programme, which we expect will tame the high inflationary pressure exerted by substantial government spending in previous years. As such, we forecast the cedi to be valued at GHS4.13/USD by end-2018, compared to consensus projections of GHS4.45/USD.

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