EEMEA Economic Weekly Africa election preview: limited threat to ANC majority

BofA Merrill Lynch Global Research - Viernes, 25 de Abril

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Things to Watch Next Week All eyes next week will be on rates decisions in Israel, Hungary and Egypt, along with the PMI release in South Africa. Watch out also for trade balance readings in Turkey and South Africa. The BoI is likely to keep the rate at 0.75% this year with a first hike in 1Q 2015, as inflation expectations are well-anchored and inflation is likely to accelerate later this year. We expect the NBH to cut its policy rate to 2.50% and further in 10bp increments to 2.25% by 2Q. The CBE is likely to keep rates on hold at 8.25% to balance elevated inflation and weak growth. In South Africa, after the March correction in new sales orders and inventories, which lowered the headline index by -1.4pts, we expect little change in April’s PMI reading, which is likely to come in at 50.5.

S. Africa in Focus: limited threat to ANC majority

Recent polls suggest the ANC is likely to win the election comfortably, although support has slipped over the past decade. If the ANC were to win more than 60% of the vote, we would expect the market reaction to be muted with USDZAR potentially strengthening toward our mid-year target of 10.25. An outcome below 60% may be negative for sovereign ratings if it led to more populist policies. (M. Sharratt; page 2)

News and Views

The Central Bank of Turkey kept the one-week repo (policy rate), ON deposit and ON lending rates unchanged at 10%, 8%, and 12%, respectively, in line with expectations. The late liquidity window lending rate was nevertheless cut to 13.5% from 15%. In Russia, the government has decided not to amend the existing budget rule this year. In South Africa, final producer prices accelerated more than expected to 8.2% yoy in March, a new fie-year high, versus the Bloomberg consensus at 7.8% and 7.7% in February. Retail sales in Poland for March rose 3.1% yoy, down from 7.0% last month and falling short of the 5.9% consensus forecast. (page 5)

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