Continued fiscal and external pressures, compounded by rising government debt, weak economic growth and political instability in some countries, is keeping the 2017 ratings outlook negative for sub-Saharan Africa.
However, some of the growth-offsetting factors, such as lower commodity prices, drought in some parts of the continent and foreign-exchange shortages in Angola and Nigeria, are expected to fade in 2017.
Ratings agency Fitch Ratings on Tuesday forecast a rise in aggregate sub-Saharan African growth from 0.9% in 2016, weighed down by poor performance in Angola, Nigeria and South Africa, to 2.9% in 2017.
“While commodity prices have regained some ground, many commodity exporters in the region are still running substantial budget and current account deficits and are facing financing strains and pressures on foreign-exchange reserves at current levels. They face further fiscal consolidation in 2017 to narrow twin deficits and stabilise their economies,” the agency said.
Fitch noted that government debt ratios would continue an upward trend across most of the region, adding that heavy spending on infrastructure, weak public financial management and the decline in commodity prices would remain important drivers of elevated budget deficits, and that political risks would also remain an important rating factor in the region.
“Instability in government will affect the ability to tackle economic policy challenges and, more seriously, social and political challenges [facing] government,” it said.
“This will put pressure on expenditure and affect the confidence of foreign investors in a number of sovereigns, such as Ethiopia, where unrest has led to the imposition of a state of emergency, or Kenya, where tensions have risen ahead of elections in 2017,” Fitch concluded.