Sub-Saharan Africa Sovereigns See Record Downgrades in 2020, Pressures Remain

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Fitch Ratings – Median GDP growth among sovereigns in sub-Saharan Africa (SSA) will contract by 2.4% in 2020, with growth expected to recover to 4% in 2021 and 5% in 2022, Fitch Ratings says.

The contraction this year will be milder than in any other major region, but is still a steep fall relative to average growth of 3.8% in 2015-2019. The rates of coronavirus infection and containment measures have been more limited in most of SSA than other parts of the world, but the indirect effects on the economies in the region via reduced commodity prices and tourism, and tighter financing conditions have still led to a heavy impact on growth and ratings.

In 2020, Fitch downgraded seven of the 19 SSA rated sovereigns (Angola and Zambia twice). Seven of the 19 sovereigns in the region are on Negative Outlook, while only one (Cote d’Ivoire) is on Positive Outlook and another five are rated below ‘B-‘, in which case Fitch does not assign an Outlook, pointing to the risk of further downgrades.

Many SSA sovereigns entered the crisis with high debt and weak external buffers, and this left the region more exposed to the pandemic’s hit to fiscal balances and external liquidity. Median government debt at end-2019, at 56.5% of GDP, was almost 20pp higher than five years before, and we expect a further rise to 72.8% by 2022 as a result of the shock.

Many SSA sovereigns lost the ability to access markets at reasonable rates in March, but the situation has since stabilised with massive monetary and fiscal support in developed economies. The rapid intervention of international financial institutions also helped to bring back confidence and supported liquidity, but no SSA sovereign has returned to issue internationally yet.

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