Increasing external risks, muted growth cast shadow on SSA sovereigns

Increasing external risks, muted growth cast shadow on SSA sovereigns

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 last month.

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 percent of GDP in 2020 compared with 3.3 percent in 2019, while the debt burden will decline to 51 percent of GDP compared with 54.5 percent of GDP in 2019, but still considerably higher than 40 percent of GDP five years ago.

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