The gradual easing of sanctions in Iran will lead to an uptick in interest from multinational pharmaceutical companies, many of which chose not to do business in Iran during this time. The supply of high value patented medicines will still be satisfied by multinationals despite increasing competition from domestic companies, with the easing of sanctions providing a more attractive operating environment.
Cocoa prices will peak in 2015 as weak production growth forces prices temporarily higher. Beyond 2015, we expect prices to decline as production growth improves and global demand growth slows over our forecast period to 2019.
Our forecast of a lower oil price environment over the coming years combined with and Denmark's limited prospectivity relative to regional players, support our long-term bearish outlook for the Danish oil and gas sector.
A quieter week for data releases in Emerging Europe, following a swathe of robust Central and Eastern Europe (CEE) real GDP growth readings last week (see 'Bullish CEE Consumption View Playing Out', May 13). Instead, data releases this week will highlight the problems facing two of the region's outliers, Russia and Turkey.
This week, our focus is on rate decisions in Nigeria and South Africa. We expect both central banks to remain on hold at 13% and 5.75% respectively. Looking ahead, we expect tightening in both countries. In Nigeria, the effects of lower oil prices on economic growth are most likely to be felt through an increase in inflation due to a depreciating currency and BMI expects 100 basis points (bps) in rate hikes this year to offset this impact. In South Africa, dovish comments from the Governor of the South African Reserve Bank (SARB) last week and an ever-weakening growth outlook suggest the SARB will keep rates on hold this month. Looking beyond, we expect a 25bps hike in H2, as the SARB feels the need to maintain its credibility in the face of an expected inflation target breach in Q1 2016. Less tightening is expected in South Africa than Nigeria, given a much weaker growth outlook for South Africa at 1.9% for 2015 and 2% in 2016 versus 3.9% and 4% for Nigeria.
Jordanian commercial banks will see strong asset growth compared to other institutions in the Middle East over the coming years, benefiting from more favourable conditions in the domestic market. We forecast total asset growth of 7.5% in 2015 and 9.0% in 2016, up from 4.8% in 2014.
The People's Bank of China reversed course on local government financing vehicles (LGFVs) on May 15, allowing for local governments to continue to derive funding from them despite an earlier moratorium on their operations. This, along with the provision of low-interest loans by the central bank to commercial banks using local government bailout bonds as collateral, constitutes a significant rollback of fiscal reforms in China and underscores the central bank's growing policy dilemma.
Near-term political stability in Thailand, as well as improving financial conditions for infrastructure projects will support construction activity over the coming quarters. We expect the sector to register real growth of 3.0% in 2015, a significant recovery from the 3.8% decline in 2014. Longer term, labour shortages and political uncertainty present a downside risks to our forecasts.
Proposed blocking of advertising from Facebook and Google on mobile networks in order to gain concessions in terms of network investment is a non-starter, because of commercial, regulatory and public opinion issues. All stakeholders should be wary of greater regulatory scrutiny, and we believe that more bilateral agreements, similar to recent deals in the interconnection market, will become the norm.