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Politics and Institutions

Egypt: Amer’s resignation raises scrutiny of pound policy

The resignation of Central Bank of Egypt (CBE) Governor Tarek Amer points to a growing tension within policymaking circles on the best way to address the country’s external imbalances. We think the next governor will ultimately need to let the pound fall further – our forecast is for the currency to fall to 25/$ by end-2024 (from 19.1/$ now) – and hike interest rates.

17 August 2022

Kenya Election Result

After nearly a week since voters went to the ballot box, William Ruto was finally announced President-elect in Kenya, but investors’ roller-coaster ride will probably continue over the coming days and weeks with political risks set to run high.Following Kenya’s elections on 9th August, results were announced today with William Ruto (currently Deputy President) declared the official winner of the…

15 August 2022

Prospects for female labour participation in India

We agree with PM Modi’s assertion in his Independence Day speech over the weekend that boosting female participation in the labour force could have a major positive impact on the economy, but in truth the government’s record in this area is poor. Looking ahead, there are still reasons to think that female employment will rise over the coming years but we aren’t convinced that it will be transformational. In view of the wider interest, we are also sending this India Economics Update to clients of our Long Run Service. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.

15 August 2022
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Kenya’s elections up in the air, mixed FX bag across SSA

The fact that Kenya’s elections have, so far, proceeded peacefully have supported a rally in the country’s bond market. But with no official results available yet and reports pointing to a tight race, significant risks abound. Meanwhile, currencies of major African economies have fared quite differently over the past month. While the South African rand has rallied, the further falls in the Ghanaian cedi and Nigerian naira (on the parallel market) point to increasingly acute economic problems.

Political wranglings weaken BJP’s hand

For all its power in parliament’s lower house (Lok Sabha), a majority in the upper house (Rajya Sabha) has remained elusive for PM Modi’s BJP. As the main party in the National Democratic Alliance (NDA), it has been closing in on its long-held ambition over the past couple of years, but the loss of support from smaller parties this week has weakened its hand. That is another constraint on supply-side reform.

Increased risk of “second-round” effects

We’ve been warning for some time that CPI inflation would rise further than most people expect, triggering a recession. The prospect of even bigger rises in utility prices on 1st October and in the first half of 2023 than we have pencilled in suggests that the risks to our forecast for CPI inflation to rise from June’s 40-year high of 9.4% to 12.5% in October are now skewed to the upside. That increases the risk of bigger, longer-lasting second-round inflation effects. Admittedly, there have been some encouraging signs that price pressures towards the start of the inflation pipeline have passed their peak. But it is worrying that domestic inflationary pressures, such as those in the services sector, are still rising, as they tend to last longer. As a result, we still think that the Bank of England will raise interest rates from 1.75% to 3.00% even when the economy is in recession.

EU & the rule of law dispute: why do EU funds matter?

EU funds will provide a key boost to economies in Central and Eastern Europe in the coming years as the region navigates a challenging macro environment and slowing global growth. Disputes with the European Commission over the rule of law in Hungary and Poland look close to being resolved, but the risk of funds being halted indefinitely remains high and would weigh heavily on growth in both countries. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

Consumer Prices (Jul.)

Consumer prices were unchanged in July and there's a good chance that prices will fall outright in August. With core consumer prices increasing by a more modest 0.3% m/m last month, which was a 10-month low, we still think the Fed will hike interest rates by 50bp at the upcoming meeting in September. CPI Drop-In (10th Aug): Will July finally mark the turning point for US inflation? Join our US Economics team for a briefing shortly after the CPI release for a briefing on the inflation outlook and the Fed response. Register now.  

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