Increasing External Risks and Weak Public Finances Keep 2020 Outlook on SSA Sovereigns Negative

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Tuesday, January 21, 2020 / 02:40 PM / By Moody's Investors Service / Header Image Credit: Hose.rw

 

  • Weak government finances will continue to pose a constraint
  • Less predictable external environment will aggravate existing challenges and make sovereigns more vulnerable to event risk

 

The negative 2020 outlook for sovereign creditworthiness in Sub-Saharan Africa reflects the worsening external environment, weak government finances and subdued GDP growth, Moody's Investors Service said in a report today.

 

Sovereigns have 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 makes 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."

 

Moody's expects modest fiscal consolidation for the region, with the median fiscal deficit improving to 3% of GDP in 2020 compared with 3.3% in 2019, while the debt burden will decline to 51% of GDP compared with 54.5% of GDP in 2019, but still considerably higher than 40% of GDP five years ago.

 

Economic growth is forecast to accelerate modestly, with regional real GDP (weighted average) growth rising to 3.5% in 2020 from 3.1% 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.


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