The leading financial intelligence and analytical service, Moody’s, has released a report maintaining the negative outlook on Sub-Saharan African (SSA) economies in a post Covid-19 pandemic world for 2021.
According to the report, the negative 2021 outlook for SSA sovereigns reflects the severe economic challenges the region will grapple with in the fallout from the coronavirus shock.
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In a statement, Kelvin Dalrymple, VP, Senior Credit Officer, Moody’s Investors Service, said:
“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% of GDP in the near to medium term.
We do not expect debt burdens to come down in the foreseeable future as revenue generation capacity remains weak.”
– VP, Senior Credit Officer, Moody’s
The report lists some of the factors expected to increasingly challenge debt affordability. These include:
- Higher debt loads
- Lower government revenue
- Low buffers
- Higher interest costs
- Weaker debt affordability
- Contigent liabilities from state-woned enterprises
The report also warns of increasing social risks triggered by high unemployment and income inequality, along with latent or rising domestic risks as part of the effects of the pandemic.
Growth recovery is expected to vary throughout the continent as follows:
- Concentrated and energy-exporting economics to recover at a slower rate due to low energy prices
- None-energy commodity exporters in East and West Africa to remain the most dynamic economies
- East and West African economies growth to be largely driven by domestic demand adn high public investment rates
- Toursim-dependent economies to recover slowly with lower than historical growth forecast for Kenya, Tanzania, and Namibia
In an effort to support struggling economies, the World Bank has commited to investing over $5 billion over the next 5 yeas in 11 African countries as they recover from the Covid-19 pandemic.
Despite the short-term bleak outlook, Africa, however, is well positioned to weather the post-pandemic storm and thrive in the near long-term.
A recent report by Google, in collaboration with the International Finance Cooperation (IFC), showed that the African Internet economy has the potential to reach 5.2% of the continent’s Gross Domestic Product (GDP) by 2025, which is nearly $180 billion of the economic output.
Another recent report by the World Bank on the African Continental Free Trade Area (AfCFTA) has said that the recently launched AfCFTA could boost regional income by 7% or $450 billion, and lift millions of Africans out of poverty by 2035.
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RECOMMENDED READING: AfCFTA Could Boost Regional Income by $450 Billion and Pull Millions Out of Extreme Poverty in Africa, Says a July 2020 World Bank Report
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