Sub-Saharan Africa Region Remains Under Fiscal and External Pressures, says Fitch

LAGOS ( Capital Markets in Africa) – The Rating Outlook for Sub-Saharan Africa (SSA) sovereigns in 2017 remains Negative, reflecting continued weakness of fiscal and external balances, rising government debt, weak economic growth and, in some countries, risks of political instability, says Fitch Ratings in a new report.

While commodity prices have regained some ground, many commodity exporters in the SSA are still running substantial budget and current account deficits and are facing financing strains and pressures on foreign exchange reserves at current levels. They face further fiscal consolidation in 2017 to narrow twin deficits and stabilise their economies.

Government debt ratios will continue their upward trend across most of the region with the median rising to 52.3% of GDP in 2017, although the pace will be slower than in 2015 and 2016. Heavy spending on infrastructure and often weak public financial management are important drivers of elevated budget deficits, as well as the decline in commodity prices.

Aggregate SSA growth in 2017 will rise to 2.9% from an exceptionally weak 0.9% in 2016 that has been weighed down by particularly poor performance in Angola, Nigeria and South Africa. This reflected the shock from lower commodity prices, drought in some parts of the continent and foreign exchange shortages in Angola and Nigeria. Some of these factors are expected to fade in 2017.

Political risks will remain an important rating factor in the region. Instability in government will affect the ability to tackle economic policy challenges and, more seriously, social and political challenges to government. This will put pressure on expenditure and affect the confidence of foreign investors in a number of sovereigns, such Ethiopia, where unrest has led to the imposition of a state of emergency, or Kenya, where tensions have risen ahead of elections in 2017.