The agency is of the view that high credit growth has been associated with high real GDP growth.
“Before 2008, countries recording the highest GDP and credit growth were oil producers (Angola, Ghana and Nigeria), and Uganda and Zambia, it stated.
Countries that have been assigned an MPI (monetary policy indicator) of two or more are also the ones that recorded a strong rebound in GDP growth after the 2009-2010 slowdown.
Fitch said Ghana and Zambia, which are both likely to record an increase in MPI from one to two at end-2012, are benefiting from rapid commodity-led GDP growth.
Ghana’s economy over the years has been driven by commodities such as cocoa, gold and recently discovered oil. Oil, for instance, played a major role in accelerating Ghana’s economic growth at 14.6% in 2011, making it one of the fastest growing economies in the world for the year 2011.
The agency’s Macro Prudential Risk Monitor report says the high credit growth in sub-Saharan Africa (SSA) rated countries primarily reflects the expansion of the financial sector from a low starting point in a context of rapid economic development.
And this, according to the agency, mitigates financial and macroeconomic risks that are often associated with high credit expansion.
The report aims to identify the build-up of potential stress in banking systems in the region.
The report highlighted rapid real credit growth to the private sector in a number of SSA countries.
The report says “Among the 15 countries rated by Fitch in SSA, eight recorded annual real credit growth above 15% over 2009-2011, which triggered a macro prudential index (MPI) of at least two (moderate risk).”
These countries are Angola, Cameroon, Gabon, Kenya, Lesotho, Mozambique, Rwanda and Uganda, according to Fitch.
Fitch opines that rising credit to GDP primarily reflects the expansion of the financial sector from a low starting point and that the SSA median credit to GDP is 21.6%, even lower than the ‘B’ median (27.7%).
It indicated that credit has been growing especially rapidly in countries where private sector credit to GDP is small and cited Ghana, Angola and Mozambique as examples.
Most SSA countries, Fitch stated, are low or lower-middle-income (GNI per capita below $4,035) and need more, rather than less, credit to finance development.
It adds “Poor access to credit is often cited as a key impediment to growth in business conditions surveys. The main constraints to credit expansion are low incomes, informal activity and weak institutions.”
It observes that monetary policy has generally tightened in 2012, which should constrain credit growth despite limited monetary policy transmission to private sector credit conditions.
Banks’ lending policies have also become more conservative, Fitch noted.
By Ekow Quandzie