Danny, you started the year giving
us a broader outlook on 2022.
I'm curious, how has that
manifested so far?
Well, I guess the key focus
would be on growth.
We've seen a few countries
release fourth quarter GDP
growth for 2021, and it's
looking pretty positive.
In fact, you know if I look at
the large economies,
Nigeria, growth estimates,
well actually the growth numbers
that came out, beat estimates.
But what's even more important,
it is the non-oil sector that is
actually starting to perform
quite well.
So that's very encouraging.
Mozambique numbers came in
a little bit better than what
we thought, actually.
You know, the've hovered
between the 2-2.5% range over
the past year.
And I think they're really on
that right momentum with
respect to growth.
Other numbers not as yet,
but there are some risks that
I'm starting to pick up.
So while growth is looking good,
the first PMI numbers that we've
seen in January were just a
little bit shattering,
to say the least.
Well below the 50 benchmark line.
What a lot of countries are
complaining about is they are
not seeing that elevated level
of consumer demand, which
would then boost output and
boost production levels.
So that's something to watch.
They've also spoken quite a bit
around the supply chain
challenges that they're still
facing and how that has an
impact on the overall production.
So somewhat of a mixed bag,
I'm still optimistic, but let's see
how this story plays out,
especially with respect to
consumer demand, whether it'll
actually recover during the
course of this year and the
impact of some of those
supply disruptions.
So you've spoken about supply
disruptions and currently where
oil levels are, and currently
where they are trading,
which regions are more at risk
given the rising prices?
So, you know, we started this
year again thinking
first quarter, we're going to
see elevated oil prices simply
on the back of a deficit that's
across the market.
So that already informed our
view that at some point,
oil would be trading higher
than $100 per barrel just based
on supply and demand dynamics.
And what effectively is happening,
demand is increasing at a time when
supply is still quite constrained.
We've seen consistently with
the past few months OPEC+
indicating that they're going
to stick to their schedule,
so that really hasn't helped in
terms of offering support to
the broader industry.
What I guess is happening now
is there's additional geopolitical
risk based on what's going on
between Russia and Ukraine.
And I think that's really going
to put a stickler on our current
view and that could have an
exacerbated impact on how this
plays out with respect to inflation.
So oil, I guess a few estimates
are being called out there.
Forecasts edging past $120.
I've seen a few calling for oil
getting to levels closer to $150.
There's a lot of uncertainty
around this.
But, you know, if you extend
that even further, it's not just
oil prices that are going up.
There's also then potentially
your broader commodity prices
that have lifted.
So to your question, with respect
to which economies we're looking at,
we expect then Nigeria and Ghana
of course to benefit from these
higher oil prices.
Nigeria is probably a little
bit more interesting.
They didn't manage to really
get production to the levels
that they wanted during the
course of last year.
So that's going to be a market
that we're going to be tracking.
But generally higher oil prices
should be positive for
export earnings.
Notwithstanding, like I
mentioned earlier,
commodity prices are
doing quite well.
In fact, your
Bloomberg Commodity Index
is at its highest level of the
past five years.
OK. When we speak about oil,
what comes to mind?
You've mentioned inflation, etc.
So in terms of implications on
monetary policy, given the
current market, what are
your expectations?
So I initially thought that
potentially we would see
inflation move somewhat
sideways, made a few
comments around upside risks.
We're definitely in an
environment where we're
dealing with upside risks on
our inflation forecasts, and I
think that is going to be a key
concern for central banks.
Globally, probably more than
the developed markets.
What I've seen more from our
central banks across the
continent is that they're
not being preemptive.
In fact, there's this broader
theme that we're entering this
environment where there's an
anticipation of high interest
rate environments,
especially coming in
from the US.
But most of your central banks
have kept rates flat.
Why?
Well, the argument is simple.
They have to try and
accommodate the economies
that are still quite frail,
given the impacts of,
impact forgive me of COVID-19.
But at the same time,
why pre-empt a high interest
rate environment when you're
trying to get that credit
extension going?
More so, if you consider the
reason why inflation is ticking
up it's supply side factors,
which I think they're well
aware they will not necessarily
be able to contain with
high interest rates.
So I see our central banks hiking.
Yes, this will take place
during the course of this year,
likely a defensive move to
protect against capital outflows,
but not aggressively.
I think it's going to be a very
tapered type of increase of
interest rates over the duration.
So the word that they are
using is gradually, a gradual
normalisation and you are
going to be seeing that.
But for me, I'm still worried
about broader global markets.
What is your take in terms of the
spillover to currency markets?
I mean, we have noted that the
cedi and the shilling have started
off the year on a weaker note.
So will this weakness continue?
So that's the actual point that
people need to focus on.
How you enter every crisis has
a very good, well, bearing as to
how you come out of it.
So to your point, cedi and
shilling are the ones we're
watching the most.
They've started off this year
on weaker footing.
We're worried that when the
market is in flux, that these
will be some of the markets
that will be greatly impacted,
already weakening on the
back of, you know, lower liquidity
across these markets.
Any other push with a potential
higher dollar environment could
then mean that these currencies
weaken even further.
We're not quite sure potentially
what would be the actual trigger,
but just based on what we're
seeing here to date, I think those
are some markets to watch.
The kwacha has performed
actually much better than we
thought it would under
these environments.
But I think what's supporting
them is we're seeing this
central bank intervention and
they're able to supply dollars
at critical levels and they've
managed to keep the kwacha
levels just below that
19 ZMW/USD level.
I don't see it, you know,
tapping into levels or edging
levels higher than that during
the course of this year.
I think the broader IMF
discussions for an environment
like Zambia would be very
constructive to see the
currency actually appreciate
post that IMF board approval.