Fitch: Improving Outlook for Sub-Saharan Africa
Link to Fitch Ratings' Report: Sub-Saharan
Africa: A Brighter Outlook?
Fitch Ratings-London-07 July 2010: Fitch Ratings says in a special report that ongoing economic liberalisation and public investment will continue to underpin sub-Saharan Africa's (SSA) economic prospects, after helping to mitigate the impact of the global recession during the last two years.
SSA saw economic growth slow in 2009 to 2.1% - its lowest since 1994 - but escaped recession. Current account and fiscal deficits, though widening, did not deteriorate severely. Although this partly reflects weaker global integration of both financial and trade systems, it also speaks to the region's improved resilience following almost a decade of economic reforms. Oil exporters such as Nigeria and Angola faced more pressure than other countries, despite entering the crisis with substantial reserves, due to weak and delayed policy responses.
"Continued structural reforms and strong public investment, even during the downturn, puts the region in a good position to take advantage of trade and investment opportunities as the global recovery gains momentum," says Veronica Kalema, Director in Fitch's Sovereign team.
SSA ratings were mostly stable throughout the global financial crisis and recession, with similar numbers of positive as negative outlooks assigned. Three Negative Outlooks were assigned - South Africa, Ghana and Lesotho - but Rwanda, Uganda, Angola and the Seychelles are on Positive Outlook.
Fitch adds, however, that weaker growth has been a set back to per capita income, which fell. All of the other indicators of creditworthiness, with the exception of inflation worsened with deficits widening and public debt increasing. However, for the most part the deterioration was modest and within the tolerance of existing rating trends.
With the worst of the global recession over, growth in SSA has begun to recover and should reach close to 5% this year. Governments are refocusing on infrastructure with capital spending rising to an average of 9%-10% of GDP in 2010-2011 for Fitch-rated countries. And in recognition of the need to source more private capital for infrastructure investment, the IMF has started to raise non-concessional external borrowing ceilings for selected SSA countries with adequate debt management capacity, and within its debt sustainability framework. This will broaden SSA funding sources to the syndicated loan market, development bank loans, non-concessional bilateral credit lines and, in some cases, the eurobond market. Thus far Senegal has used the increased borrowing ceiling to issue a eurobond in December 2009. More countries are likely to follow, with Tanzania, Zambia, Angola ('B+'/Positive) and Nigeria ('BB-'/Stable) planning eurobond issues over the coming year, mainly for the purpose of infrastructure investment.
Despite progress on structural and institutional reforms, both the pace and extent of reforms lag other regions. Structural reforms to improve the business environment will need to continue to be implemented rigorously to improve the effectiveness of the new public investment by crowding in private investment. Governance indicators also remain weak compared to other regions.
The report 'Sub-Saharan Africa: A Brighter Outlook?' is available on www.fitchratings.com.
Contacts: Veronica Kalema +44 20 7417 6336 begin_of_the_skype_highlighting +44 20 7417 6336 end_of_the_skype_highlighting, Richard Fox +44 20 7417 4239 begin_of_the_skype_highlighting +44 20 7417 4239 end_of_the_skype_highlighting, Eric Paget-Blanc +33 1 44 29 91 33 begin_of_the_skype_highlighting +33 1 44 29 91 33 end_of_the_skype_highlighting.
Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364 begin_of_the_skype_highlighting + 44 (0)20 7417 4364 end_of_the_skype_highlighting, Email: peter.fitzpatrick@fitchratings.com.
Additional information is available on www.fitchratings.com.
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