Fitch predicts stable outlook for sub-Saharan Africa in 2014
With macro stability, sub-Saharan Africa (SSA) is projected to have a stable outlook in the year 2014, Fitch said in its latest rating report on the region.
In its 2014 Outlook report for SSA sovereigns which was published December 13, 2013, Fitch is predicting that growth will pick up in 2014, helped by recovery in Europe.
The ratings agency expects SSA’s GDP growth to pick up slightly in 2014, to average 5.1%.
But it warned that financial market turbulence linked to the US Fed tapering could pose challenges for sovereigns with twin deficits and high foreign participation in local markets. The prospect of the Fed tapering caused a hiatus in Eurobond issuance from May but Nigeria re-opened the market in July with its second issue and Ghana followed shortly afterwards, although its weakened fundamentals meant it paid a higher yield.
Despite that, Fitch said “overall, the region’s rating outlook is stable”. It considered the overall rating outlook for SSA as stable, despite a much higher balance of Positive over Negative Outlooks compared with a year ago.
Of the 16 ratings in the region, Fitch said 69% of Outlooks are Stable (up from 60% a year ago), 25% Positive (20% a year ago) and only 6% Negative (20% last year).
The history of rating improvement in SSA has been slow. In over a decade of ratings in the region, none aside from South Africa has moved up by more than a notch. This is partly a reflection of the heavy weight of structural weaknesses in the average SSA credit – per capita income, governance and financial development – which are difficult to change quickly.
According to Fitch, the benefit of Africa enduring macro stability is raising business and consumer confidence, together with increased public infrastructure spending, funded in an increasing number of cases by non-concessional finance, notably Eurobonds.
With liquidity likely to be less abundant in 2014, Fitch noted that countries with weaker fundamentals, especially twin deficits, and with heavy foreign investor participation in local markets, are likely to face more challenges than countries with smaller financing needs. It adds “South Africa, Ghana and Kenya all fall into the former category”.
The biggest external risk to Africa in 2014 will come from US Fed tapering and domestically, could come from over-loose fiscal policy which has emerged in a few countries in2013 – all subject to negative rating action.
By Ekow Quandzie
Fitch predicts stable outlook for sub-Saharan Africa in 2014
With macro stability, sub-Saharan Africa (SSA) is projected to have a stable outlook in the year 2014, Fitch said in its latest rating report on the region.
In its 2014 Outlook reportfor SSA sovereigns which was published December 13, 2013, Fitch is predicting that growth will pick up in 2014, helped byrecovery in Europe.
The ratings agency expects SSA’s GDP growth to pick up slightly in 2014, to average 5.1%.
But it warned that financial market turbulence linked to the US Fed tapering couldpose challenges for sovereigns with twin deficits and high foreign participation inlocal markets. The prospect of the Fed tapering caused a hiatus in Eurobond issuance from May but Nigeria re-opened the market in July with its second issue and Ghana followed shortly afterwards, although its weakened fundamentals meant it paid a higher yield.
Despite that, Fitch said “overall, the region’s rating outlook is stable”. It considered the overall rating outlook for SSA as stable, despite a much higher balance of Positive over Negative Outlooks compared with a year ago.
Of the 16 ratings in the region, Fitch said 69% of Outlooks are Stable (up from 60% a year ago), 25% Positive (20% a year ago) and only 6% Negative (20% last year).
The history of rating improvement in SSA has been slow. In over a decade of ratings in the region, none aside from South Africa has moved up by more than a notch. This is partly a reflection of the heavy weight of structural weaknesses in the average SSA credit – per capita income, governance and financial development – which are difficult to change quickly.
According to Fitch, the benefit of Africa enduring macrostability is raising business and consumer confidence, together withincreased public infrastructure spending, funded in an increasing number of cases bynon-concessional finance, notably Eurobonds.
With liquidity likely to be less abundant in 2014, Fitch noted that countries with weakerfundamentals, especially twin deficits, and with heavy foreign investorparticipation in local markets, are likely to face more challenges than countrieswith smaller financing needs. It adds “South Africa, Ghana and Kenya all fall into the formercategory”.
The biggest external risk to Africa in 2014 will come from US Fed tapering and domestically, could come from over-loose fiscal policy which has emerged in a few countries in2013 – all subject to negative rating action.
By Ekow Quandzie