Frontier markets see varied inflation rates: Fitch

July 12, 2024 (MLN): Annual inflation rates in Frontier Markets (FM) have generally moderated in recent months, but there are a handful of countries where that outcome has been less favorable with CPI inflation rates proving sticky or showing outright increases, as highlighted in Fitch Ratings’ latest Frontier Vision chart pack.

The diverging trend is resulting in contrasting monetary policy steps with several FM central banks loosening policy rates while others take the opposite stance.

Easing CPI inflation rates led central banks to cut policy interest rates in Armenia, Azerbaijan, Costa Rica, Georgia, Mongolia, Mozambique, Pakistan, Rwanda and Tajikistan.

On the other hand, CPI inflation in Nigeria increased to another exceptionally high level of 34% YoY in May with the central bank lifting policy rates by 150bpss to 26.25%.

The National Bank of Angola also raised rates to 19.5% from 19%, as inflation continues to rise, reaching 30.2% YoY in May.

Bank of Papua New Guinea increased the Kina Facility Rate by 50bps to 2.5% due to expectations of higher inflationary pressures and Bank of Zambia raised the Monetary Policy Rate by 100bps to 13.5% to contain inflationary pressures and address rising inflation expectations.

Inflation in Zambia has been on the upward trend since July 2023 owing to the weakening of the kwacha with rising prices of fuel and food – in particular maize grain.

The report also shows that while international reserves are stable or growing, there are some notable exceptions where the decline has been significant in recent months.

Bolivia’s gross reserve assets excluding gold – including FX, SDR, IMF reserve position and others – dropped in April 2024 to $209 million, the lowest in three decades.

Georgian international reserves are also on a downward trajectory since their peak of $5.4 billion in August 2023 and in June 2024 international reserves excluding gold stood at just above $4bn.

Fitch’s quarterly ‘Frontier Vision’ chart pack tracks high-frequency macroeconomic data for the countries included in the J.P. Morgan’s Next Generation Markets Index.

The charts cover five years of historical data and the choice of data series has been harmonised as far as possible across all countries to facilitate comparisons.

The index comprises countries representing sub-Saharan Africa, Latin America & the Caribbean, the Middle East & North Africa, Europe, Asia and Oceania.

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