Moody’s Investors Service has said that the negative 2020 outlook for sovereign credit worthiness in sub-Saharan Africa (SSA) reflects the worsening external environment, weak government finances and subdued GDP growth.
In a report released yesterday, the rating agency stated that countries in sub-Saharan Africa had made limited progress in reducing risks linked to elevated debt burdens and debt servicing needs, while growth won’t be strong enough to meaningfully buttress incomes or increase economic resilience.
“The less predictable external environment is aggravating sub-Saharan African sovereigns’ existing challenges and make them more vulnerable to event risk,” said David Rogovic, a Moody’s Vice President – Senior Analyst and the report’s co-author.
“Most governments’ limited capacity to respond to even modest negative external shocks exacerbates the region’s sensitivity to the more negative global environment,” he added.
Moody’s said it expected modest fiscal consolidation for the region, with the median fiscal deficit improving to three per cent of GDP in 2020 compared with 3.3 per cent in 2019, while the debt burden will decline to 51 per cent of GDP compared with 54.5 per cent of GDP in 2019, but still considerably higher than 40 per cent of GDP five years ago.
“Economic growth is forecast to accelerate modestly, with regional real GDP (weighted average) growth rising to 3.5 per cent in 2020 from 3.1 per cent in 2019, weighed down by sluggish growth in the region’s largest economies, Nigeria and South Africa. Growth remains below what is needed to raise incomes significantly or to increase economic resilience, while risks are tilted to the downside given the less predictable external environment,” the rating agency said.
