Inflation directly impacts the cost of doing business, erodes profitability, and significantly influences investment returns. For private equity and venture capital firms, accurate inflation projections are not merely an analytical exercise but a vital component of comprehensive risk management.
This note details Stears’ methodology for forecasting monthly and annual inflation across African countries. It provides a robust and adaptable approach for private capital market professionals to integrate these forecasts into their strategic decision-making processes by enhancing due diligence, optimising valuations, managing portfolio risks, and informing robust exit strategies in Africa's dynamic economic landscape. The core of this approach involves predicting the monthly change in the Consumer Price Index (CPI), integrating historical averages, recent trends, and an explicit consideration of potential macroeconomic shocks.
The subsequent sections will elaborate on the data foundation, the core forecasting model, and the economic justifications for its efficacy in Africa.
Inflation Forecasting Methodology: Monthly CPI Change Approach
Data Foundation: High-Frequency CPI Data
The foundation of these inflation forecasts rests
