Negative outlook for government bonds
The creditworthiness of sovereigns in Sub-Saharan Africa has an overall negative outlook for 2017, reflecting the liquidity stress facing commodity-dependent countries, subdued economic growth, and persistent political risk, Moody's Investors Service said in its latest report.
The negative outlook for sovereign creditworthiness in 2017 in Sub-Saharan Africa reflects Moody's expectations for the fundamental credit conditions that will drive sovereign credit in this region over the next 12 to 18 months.
“Sub-Saharan Africa's economies will continue to face commodity-induced liquidity stress in 2017, with recurring fiscal deficits amid challenging financing conditions,” said Lucie Villa, a Moody's vice-president, senior analyst and co-author of the report. “These will remain important credit constraints and underpin our negative outlook for Sub-Saharan Africa sovereigns overall.”
The negative pressures on Sub-Saharan Africa's sovereigns were reflected in numerous negative rating actions in 2016. By the end of last year, Moody's had downgraded a third of the region's 19 rated sovereigns by an average of around two notches. This compares with 29 downgraded sovereigns globally by an average of slightly more than one notch.
Five of the seven sovereigns downgraded in Sub-Saharan African in 2016 carry negative outlooks, underscoring Moody's view that pressures that led to rating downgrades will persist in 2017.
The negative impact on liquidity from the oil and commodities price shock will primarily be concentrated in Gabon, Mozambique, the Republic of the Congo and Zambia, but will also be evident in Angola and to a lesser extent in Nigeria. However, in other countries, Moody's expects liquidity risk to remain broadly stable next year.
The authorities in the majority of the 19 rated Sub-Saharan African sovereigns have embarked on fiscal consolidation plans, which Moody's expects will have a positive impact in 2017. A noticeable exception is Botswana where the government will continue its counter-cyclical policy started in 2015.
However, fiscal consolidation policy will face obstacles, stemming in particular from subdued growth, related social demands and potential shocks from the weather and geopolitics.
Real gross domestic product growth among rated countries in the region is forecast at 3.5% in 2017 from 1.5% last year, although it will vary markedly across the region. Countries that are dependent on commodity exports will see economic activity constrained in 2017.
Sluggish growth in Nigeria and South Africa will greatly influence the region's outlook given the size of their economies, which jointly account for almost two-thirds of the gross domestic product of the 19 rated Sub-Saharan African sovereigns. Both economies will gradually recover from the impact of negative supply-side shocks, but growth will remain subdued.
STAFF REPORTER
The negative outlook for sovereign creditworthiness in 2017 in Sub-Saharan Africa reflects Moody's expectations for the fundamental credit conditions that will drive sovereign credit in this region over the next 12 to 18 months.
“Sub-Saharan Africa's economies will continue to face commodity-induced liquidity stress in 2017, with recurring fiscal deficits amid challenging financing conditions,” said Lucie Villa, a Moody's vice-president, senior analyst and co-author of the report. “These will remain important credit constraints and underpin our negative outlook for Sub-Saharan Africa sovereigns overall.”
The negative pressures on Sub-Saharan Africa's sovereigns were reflected in numerous negative rating actions in 2016. By the end of last year, Moody's had downgraded a third of the region's 19 rated sovereigns by an average of around two notches. This compares with 29 downgraded sovereigns globally by an average of slightly more than one notch.
Five of the seven sovereigns downgraded in Sub-Saharan African in 2016 carry negative outlooks, underscoring Moody's view that pressures that led to rating downgrades will persist in 2017.
The negative impact on liquidity from the oil and commodities price shock will primarily be concentrated in Gabon, Mozambique, the Republic of the Congo and Zambia, but will also be evident in Angola and to a lesser extent in Nigeria. However, in other countries, Moody's expects liquidity risk to remain broadly stable next year.
The authorities in the majority of the 19 rated Sub-Saharan African sovereigns have embarked on fiscal consolidation plans, which Moody's expects will have a positive impact in 2017. A noticeable exception is Botswana where the government will continue its counter-cyclical policy started in 2015.
However, fiscal consolidation policy will face obstacles, stemming in particular from subdued growth, related social demands and potential shocks from the weather and geopolitics.
Real gross domestic product growth among rated countries in the region is forecast at 3.5% in 2017 from 1.5% last year, although it will vary markedly across the region. Countries that are dependent on commodity exports will see economic activity constrained in 2017.
Sluggish growth in Nigeria and South Africa will greatly influence the region's outlook given the size of their economies, which jointly account for almost two-thirds of the gross domestic product of the 19 rated Sub-Saharan African sovereigns. Both economies will gradually recover from the impact of negative supply-side shocks, but growth will remain subdued.
STAFF REPORTER
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