Moody’s sees negative 2021 outlook for sub-Saharan Africa, with severe economic challenges

By Charles Abuede

• Says growth recovery will be sluggish with far-reaching implications for already weak revenue generation
• Non-energy commodity exporters in East, West Africa will remain the most dynamic economies in 2021

Moody’s Investor Service has, in a recent report, revealed that its negative 2021 outlook for sub-Saharan African (SSA) sovereigns echoes the severe economic challenges the African region will come to grips with as a fallout from the coronavirus shock.

According to the report, the sub-Saharan African (SSA) sovereigns’ growth recovery will be sluggish, with far-reaching implications for her already weak revenue generation power. It also asserted that lower overall economic growth and revenue, coupled with higher government spending, will also lead to wider fiscal deficits and higher debt for the region.

According to Kelvin Dalrymple, vice president and senior credit officer at Moody’s Investors Service, the growth recovery will fluctuate throughout the region while higher debt levels, weaker debt affordability, and low buffers still pose significant challenges, given limited institutional capacity for the region as debt burdens are not anticipated to see a decline in the near term.

“Most sub-Saharan African governments’ debt burdens will stabilise at materially higher levels in 2021, with the average debt burden for the region at around 64 per cent of gross domestic product (GDP) in the near to medium term. Similarly, we do not expect debt burdens to come down in the foreseeable future as revenue generation capacity remains weak. Higher debt loads, lower government revenue, and higher interest costs will increasingly challenge debt affordability. Contingent liabilities from state-owned enterprises also pose an additional risk,” said Dalrymple.

The Moody’s report noted that leaders within the sub-Saharan African states will also face a wide range of institutional and governance challenges, adding that this will limit their ability to deal with the coronavirus shock.

Thereport also asserted that the effects of the pandemic that have triggered higher unemployment and income inequality, along with latent or rising domestic political risks, will likely increase social risks across several countries.

Growth recovery will differ across the sub-Saharan Africa region, the report further informed, and noted that the slower rates of recovery will be seen among the concentrated and energy exporting economies due to low energy prices. On the other hand, tourism-dependent economies will recover slowly, with lower than historical growth forecast for Kenya, Tanzania and Namibia.

Nevertheless, the non-energy commodity exporters in East Africa and West Africa will remain the most dynamic economies in 2021 with growth driven by domestic demand and high public investment rates, Moody’s stated.