Moody’s sees an easing of credit pressure for some sub-Saharan African countries
RATINGS agency Moody’s Investors Service foresees an easing of credit pressures in some sub-Saharan African (SSA) countries this year as credit profiles display some resilience at their lower rating levels, with growth in gross domestic product (GDP) for the region accelerating to 3.5 percent this year from an estimated 2.8 percent in 2018, it said yesterday.
In its report “Sovereigns – sub-Saharan Africa: 2019 outlook negative as fiscal, external challenges persist despite easing pressures,” it said regional economic growth would expand at a faster pace than last year.
“Moody’s expects government debt ratios to deteriorate only marginally or stabilise in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt to GDP,” the company said. “Debt trajectories for a number of sovereigns remain vulnerable to lower-than-expected growth, exchange-rate depreciations and contingent liability risk from weak stateowned enterprises.”
Fifteen of the 21 sovereigns that Moody’s rates in SSA had a stable outlook, while six hold a negative stance, it said.
The agency corroborated a recently released World Bank forecast for the region, including South Africa’s marginal growth of 1.3 percent in 2019 from an estimated 0.5 percent in 2018.
Nigeria is forecast for 2.3 percent growth in 2019 from an estimated 1.9 percent in 2018.
“The region’s two largest economies – Nigeria and South Africa – will recover slowly, but growth in these two countries will remain well below levels seen in the first half of the decade,” the agency said.
It said exposures to tightening global financing conditions varied across the region.
“Sovereigns with large current account deficits, high external debt repayments and large shares of foreign-currency debt are likely to continue to experience external pressures,” Moody’s said.
With few exceptions, the ratings agency expected government debt ratios to deteriorate only marginally or stabilise in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt-to-GDP.
It said debt trajectories for a number of sovereigns remain vulnerable to lower-than-expected growth, exchange rate depreciations and contingent liability risk from weak state-owned enterprises.