Emerging Markets: SSAs Will Likely Be Among the World's Slowest Growing Economies in 2021


Thursday, June 17 2021  / 12:35 PM / by Proshare Research / Header Image Credit: MSCI

S&P Global Ratings has released a new report on emerging markets with a focus on Sub-Saharan African Economies. The report titles Emerging Markets: Pandemic's Fallout and Existing Challenges Restrain Sub-Saharan Africa's Recovery takes a critical look at the macroeconomic environment and the impact of the COVID-19 pandemic on the SSAs.


The rating agency stated in the report that although reports of the death toll of the COVID-19 pandemic in SSAs have been generally lower in other regions, the countries in the SSA region didn't avoid the economic fallout from the worldwide recession and lockdowns as many implemented lockdowns at varying degrees after the first wave of COVID infections and subsequent spikes, which spared the region from the worst of the health crisis but also led to changes in mobility patterns that induced economic losses. The SSA economy shrank by an IMF estimate of 1.9% in 2020.

The key takeaways of the research report are stated as follows:

  • Sub-Saharan Africa (SSA) will likely be among the world's slowest growing regions in 2021. The size of the economies of five key SSA countries (Ethiopia, Ghana, Kenya, Nigeria, and South Africa) will be 6.6% smaller than the pre-pandemic long-run trend-based estimate by the end of 2024.


  • Pandemic-induced GDP growth shock has hit the SSA sovereigns' fiscal metrics; an expected slow recovery will continue to contribute to existing challenges in the region.


  • SSA corporations are recovering, but remain subject to longstanding red tape and government failures, which have been amplified by the pandemic and are sources of operational friction.


  • SSA banking sectors' growth prospects remain subdued due to the pandemic's lingering impact, profitability levels may recover to pre-crisis levels after 2022, while credit losses moderate.


S&P on Nigeria.

The rating agency stated that the expected recovery of the global economy and commodity markets, as well as easing of COVID related restrictions will cause the economic outlook for 2021 to be slightly more favorable for Nigeria, improving crude prices in 2021 should support the recovery, with GDP growth rebounding to 1.9% in 2021 and averaging 2.3% in 2022- 2024. Stronger export earnings is expected to support the current account deficit which will likely fall to 1.2% of GDP in 2021 from 3.2% in 2020, shifting to a modest surplus of about 1.7% in 2023-2024.


Furthermore, the rise in oil prices will help the consolidated general government at the center and at states level fiscal deficits to narrow to 5.0% in 2021 from 5.5% in 2020 and to about 4.2% in 2022-2024 while external financing gaps could emerge if economic assumptions weaken or if funding from official lenders or other sources is not as forthcoming as expected.


However, fiscal and external pressure will remain high over the next few years as Nigeria's fiscal flexibility is constrained by very low levels of revenue. Also, a tightly managed exchange-rate regime and high inflation limit the effectiveness of monetary policy transmission and constrain growth, while the banking sector remains vulnerable to asset quality problems, especially in the oil and gas sector while the government also increased its dependence on the central bank loans to fund its fiscal deficit.


Low tax collection was also identified as one of the largest constraints on Nigeria's fiscal flexibility and persistent myriad of security risks.

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