Reviews & Outlooks | |
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Wednesday, January 13, 2021 / 7:59 PM / by Moody's Investors Service / Header Image Credit: Khusoko
The negative 2021 outlook for Sub-Saharan African
(SSA) sovereigns reflects the severe economic challenges the region will
grapple with in the fallout from the coronavirus shock, Moody's Investors
Service said in a report published today.
SSA sovereigns' growth recovery will be slow, with
far-reaching implications for already weak revenue generation. Lower overall
economic growth and revenue, coupled with higher government expenditure, will
also lead to wider fiscal deficits and higher debt for the region.
"Most Sub-Saharan African governments' debt
burdens will stabilise at materially higher levels in 2021, with the average
debt burden for the region at around 64% of GDP in the near to medium
term," says Kelvin Dalrymple, Vice President - Senior Credit Officer at
Moody's Investors Service. "We do not expect debt burdens to come down in
the foreseeable future as revenue generation capacity remains weak. Higher debt
loads, lower government revenue, and higher interest costs will increasingly
challenge debt affordability. Contingent liabilities from state-owned
enterprises also pose an additional risk."
Sub-Saharan African sovereigns also face a wide range
of institutional and governance challenges, limiting their ability to deal with
the coronavirus shock. The effects of the pandemic that have triggered higher
unemployment and income inequality, along with latent or rising domestic
political risks, will likely increase social risks across several countries.
Growth recovery will vary across Sub-Saharan Africa, with
concentrated and energy exporting economies to recover at a slower rate due to
low energy prices. Non-energy commodity exporters in East Africa and West
Africa will remain the most dynamic economies, with growth driven by domestic
demand and high public investment rates. On the other hand, tourism-dependent
economies will recover slowly, with lower than historical growth forecast for
Kenya, Tanzania and Namibia.
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