We have lowered our average Brent oil price assumption by $10/bbl to $54/bbl for 2020 due to lower global demand for oil. Such a decline exposes significant vulnerabilities among MENA oil-exporting countries, especially Oman and Bahrain. External and fiscal positions are expected to weaken.

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.

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.

Though the average capital adequacy ratio of Chinese banks is higher than the required minimum, banks still need to raise more capital for both regulatory and business reasons. Chinese policymakers have introduced new rules and instruments to help bank capitalization. 

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.

Growth has come to a halt, mainly due to weak investment. While external headwinds exist, domestic policy uncertainty has been a drag, especially for non-residential investment and domestic machinery. Lacking more decisive measures to boost investment, macroeconomic conditions could quickly worsen. 

Romania’s fiscal picture continued to deteriorate significantly in 2019. Corrective measures are needed, including a delay of pension increases. Early elections could provide a new government with the needed mandate. In the absence of fiscal consolidation, the loss of investment grade looms.

The fixed exchange rate was not adequately supported by other policies. Loose fiscal policy pushed public debt to unsustainable levels, while a slowdown of capital inflows, corruption, and regional conflicts weakened economic prospects. A viable economic program with international financing is key. 

Economic sanctions are a form of government market intervention and can have significant unintended and uncertain consequences—particularly if they are placed on an economy highly integrated into the global economy and the international financial system. In this respect, the measures taken by the United States and its allies against Russia beginning in 2014 represented a paradigm shift.