Entries for 'Sub-Saharan Africa'
March 4, 2020
South Africa’s 2020 budget was well-received by financial markets. The proposed adjustment is largely driven by cuts to the wage bill. Savings are just enough to offset weaker revenue due to weak growth. Thus, public debt is still set to increase to ~70% of GDP by FY22/23. Key risks remain low growth, union resistance, and struggling SOEs.
March 2, 2020
Ethiopia has experienced the world’s highest real GDP growth in recent years. But high external financing needs and low reserves represent vulnerabilities. The recently approved IMF program will allow for buffers to be established. Structural reforms, in particular of SOEs, are needed for sustainable growth.
February 26, 2020
Real convergence in Sub-Saharan Africa has been weak despite robust growth. We believe that low total factor productivity growth is partially responsible. Furthermore, relatively weak investment is weighing on economic activity. As population growth slows, both will be key for standard-of-living gains.
January 29, 2020
South Africa and Mexico face significant fiscal risks from struggling SOEs. Both Eskom and Pemex are receiving sizable support from governments. Such risks prompt SARB and BANXICO to keep real rates above EM peers. A downgrade of sovereign credit ratings could lead to large portfolio outflows. However, risks to debt sustainability are higher in South Africa than Mexico.
January 22, 2020
Government debt in Sub-Saharan Africa has risen markedly in recent years. This is partly due to issuance of Eurobonds in a low interest rate environment. Debt amortization will peak in 2024-25, while financing needs remain high. As a result, these countries will need to attract significant non-resident capital. Tightening of global financial conditions could increase debt costs substantially.
January 15, 2020
Sub-Saharan Africa continues to display stronger growth than other EMs. However, this has not resulted in meaningful real convergence for most. Continued high, though declining, population growth is partly responsible. Higher productivity growth is necessary to improve living standards quicker. Rising indebtedness represents the key risk to the medium-term outlook.
December 20, 2019
Structural impediments remain unaddressed and constrain near-term growth. Low growth is the main reason for revenue underperformance and rising debt. Credible fiscal consolidation could improve business and consumer sentiment, paving the way for real GDP growth to pick up to around 2% in the medium term.
December 11, 2019
The release of the 2019 MTBPS was a wake-up call for politicians, just like in 2017. The 2020 budget in February, union negotiations, and Eskom resolution are key. Moody’s is likely to downgrade South Africa’s rating to sub-IG sometime in 2020. A deep domestic market and low short-term and FX debt mitigate our concerns. But with deteriorating debt dynamics, South Africa is exposed to external shocks.
November 13, 2019
Weak growth has led to deteriorating debt dynamics in recent years. Falling business and consumer confidence do not point to a recovery. External imbalances remain despite weak activity and depreciation. Interest payments to non-residents have risen sharply due to high debt. The Rand is vulnerable to shifts in market sentiment and portfolio flows.
November 6, 2019
Markets were disappointed by the 2019 MTBPS announcement. Revisions to growth, deficit, and debt were worse than expected. This follows an Eskom plan lacking details on debt restructuring. Moody’s changed the outlook to negative but kept the IG rating. Key market concern is no longer the rating, but debt sustainability.
August 16, 2019
Zambia borrowed extensively from abroad after 2015, leading to considerable external financing requirements. Fiscal and monetary policy will have to be contractionary, however, the level of adjustment needed is very large. Thus, Zambia is a prime candidate for an IMF program.
April 10, 2019
We recently returned from a research trip to South Africa where we met policymakers, analysts, rating agencies, and local asset managers. This note summarizes our key takeaways from the trip.
April 10, 2019
Nationwide protests continue, triggered by dissatisfaction with the Al-Bashir regime. Sudan has contended for years with FX shortages and high inflation. Restoring confidence will require new leadership with the credibility and will to implement reform, and we expect a transition to take place.
February 22, 2019
South Africa’s Budget 2019 includes adjustments, which are markedly offset by sizable bailout funding for Eskom, leaving the government’s deficit targets to widen compared to those presented last October. The worsening fiscal position and rising public debt are key risks for the credit rating.
February 22, 2019
Angola is seeking to make its growth model more sustainable, inclusive, and diversified. An IMF program has started, and policy adjustment is underway, but benefits will take time to accrue. Evidence connecting key figures to a Mozambican scandal may limit the credibility of the reform drive.
September 21, 2018
An acceleration in investment should lift real GDP growth to 7.4% in 2018. Fiscal and current account deficits are likely to widen this year but remai
August 23, 2018
Public debt rose sharply as fiscal deficits widened to finance investment. Very low international reserves give rise to external vulnerability. Fiscal
April 11, 2018
Growth is recovering as oil prices and production rebound. Structural weaknesses cloud the medium-term outlook. The security situation is tenuous, and
April 2, 2018
The deficit spiked last year, driving public debt even higher, to 57% of GDP. Election and drought-related expenses were the main deficit drivers, and
March 13, 2018
Recent political changes and policy adjustments have improved investor and consumer sentiment.' Fiscal policy is focused on deficit reduction, which c