With a projection of continued economic recovery in the 
Moody’s expectation of continuity in SSA’s gradual economic recovery of 2018, sees regional real GDP growth accelerating to 3.5 percent in 2019 from an estimated 2.8 percent in 2018.
According to the firm, 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.
“In Nigeria, Moody’s projects that real GDP growth will reach 2.3 percent in 2019 from an estimated 1.9 percent in 2018. In South Africa, growth will reach 1.3 percent in 2019 from an estimated 0.5 percent in 2018,” the firm said.
The projection is despite the firm’s negative outlook for Sub-Saharan African sovereigns’ on the back drop of credit challenges that stem from fiscal and external vulnerabilities amid tightening global liquidity conditions and rising global trade tensions.
Moody’s report, “Sovereigns — Sub-Saharan Africa: 2019 outlook negative as fiscal, external challenges persist despite easing pressures,” noted that going into 2019, 15 of the 21 sovereigns that Moody’s rates in the Sub-Saharan Africa (SSA) region have a stable outlook, while six hold a negative outlook.
“Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities,” said Daniela Re Fraschini, assistant vice president, analyst and author of the report.
“That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels.”
Most governments across the region plan further fiscal consolidation this year, although progress remains gradual amid still soft growth conditions in some cases. The presence of IMF programs throughout the region supports the fiscal outlook and reform impetus for 2019.
With few exceptions, Moody’s expects government debt ratios to deteriorate only marginally or stabilize in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt-to-GDP.
Based on this, Moody’s thinks that 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. It also expects that debt affordability will continue to weaken in a number of countries.
Exposures to tightening global financing conditions vary across the region, Moody’s observed, stating that 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.
The research firm also says political risk remains a key credit constraint for several SSA sovereigns, but noted that the sources of political risk, ranging from domestic civil unrest, conflicts, succession risk, or simply from policy unpredictability, and their credit implications vary across the region.
