Nigeria: Strong Growth Despite Headwinds

Nigeria’s economy, the largest in Africa, is performing remarkably well. Strong domestic demand is driving growth notwithstanding challenges which include security concerns, significant theft from oil pipelines, and volatility in capital flows against the backdrop of upcoming elections in February 2015. Inflation is rising again due to pressures on food prices and monetary policy is expected to remain tight into 2015. Important structural reforms, such as the privatization of the power sector, are underway and these are expected to ease constraints on growth.

ndia: Wind in the Sails

The economic program of Prime Minister Narendra Modi, the post-stabilization measures aimed at gradually building the foundation for a stronger economic performance. While near-term prospects are improving, there are a number of external and domestic challenges to navigate.

election boost to sentiment, and continuing large capital inflows are underpinning an increasingly buoyant outlook. The government has embarked on wide-ranging reforms along with macro-stabilization measures aimed at gradually building the foundation for a stronger economic performance. While near-term prospects are improving, there are a number of external and domestic challenges to navigate.

U.S. Shale: Medium-Term Outlook Bright, Clouds Beyond

The resurgence of U.S. oil and gas production fueled by shale drilling technologies has led to dramatic reductions in energy imports, sharply reduced domestic oil and gas prices, and provided an uplift to the power and energy-intensive manufacturing sectors. As a result, the U.S. will continue to decrease dependence on foreign oil until 2020 and will become a net exporter of natural gas from 2017 onwards. However, continued growth in oil production, which looks favorable in the medium-term, could face headwinds later in the decade, slowing down and possibly reversing the steady rise of recent years

A full liberalization of energy exports could substantially ease the constraints.

Venezuela—market jitters:

President Nicolás Maduro pledged yesterday to pay the country's external obligations, helping to ease the sharp spike in sovereign bond spreads seen over the past week. Nevertheless, the 2027 global bond yield has increased 270 bps to 13.5% since late July and 5-year CDS spreads widened 557 bps to 1494 bps (Chart 5.1). The sell-off was triggered by a cabinet reshuffling, which sidelined former economic chief, Rafael Ramírez, signaling further delays in needed macro policy adjustments. A suggestion by a prominent Venezuelan economist, Ricardo Hausmann, to default on the country's sovereign bonds, rather than continuing to accumulate debt arrears with the private sector, added to market nervousness. The economy is facing stagflation amid softening oil prices and rising distortions. With declining popular approval and infighting within Maduro's ruling coalition, the government's scope to maneuver is increasingly narrow. Looming principal and interest repayments are near $7 billion in the remainder of 2014. We believe the government's economic problems largely stem from internal rather than external sources. It has the capacity to service its debt and will strive to avoid a default in the near term. However, default remains a risk if access to global markets becomes increasingly more expensive and the economy continues its downward spiral.