CEEMEA Macro & Strategy Weekly

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CEEMEA Macro & Strategy Weekly

higher energy costs - likely to settle around 4,3-4,5% and peak in 1Q27. Growth is likely to surprise to the downside of our 1,4%

forecast should the household dip into recession, which is not in our baseline currently. This may hamper the SARB's ability to hike more than 2-3 times this year. The fiscal

Economics

outlook remains supported by favourable commodity prices and higher inflation, which should balance out the negative effects of weaker growth and higher borrowing costs.

The current account is still likely to be in surplus position, thanks to the stronger trade balance, and likely improvement in net-services as tourism kicked off favourably at the

start of the year. Risks remain to the downside.

South Africa ranks poorly across the board in our scorecard, especially in steady-state return characteristics, historically its strength. Interestingly, it ranks second in fiscal

impulse, a historically challenging variable. While South Africa previously compensated well for fiscal challenges and high FX volatility, improved dynamics in these areas have

Cash bonds:

noticeably reduced the offered premium. Valuation is also rich, though less so than late last year. We recognize the country's difficulties and suggest other high-yielders like

South Africa overweight

Brazil and Mexico offer more value. However, South Africa is still not a structural underweight for us. Moody's recently delivered a positive rating change, acknowledging fiscal

discipline and credible institutions. And markets are likely overpricing the SARB hiking cycle.

The SARB has delivered the much-anticipated rate hike. With the new 3% inflation target, near-term noticeable misses, and further deviation of