East Africa and West Africa to Remain Most-dynamic Economies, says Moody’s

Moody's - Negative outlook for Sub-Saharan African sovereigns as debt costs will intensify post pandemic

East Africa and West Africa will remain as Africa’s most dynamic economies, Moody’s Investors Service said Thursday.

In its Sub-Saharan Africa report, the firm projected a negative 2021 outlook for Nigeria, South Africa, Kenya and the entire region citing  debt costs post Covid-19 pandemic.

According to the report, lower overall economic growth and revenue, coupled with higher government expenditure, will also lead to wider fiscal deficits and higher debt for the region.

“Most Sub-Saharan African governments’ debt burdens will stabilise at materially higher levels in 2021, with the average debt burden for the region at around 64% of GDP in the near to medium term,” says Kelvin Dalrymple, Vice President – Senior Credit Officer at Moody’s Investors Service.

“We do not expect debt burdens to come down in the foreseeable future as revenue generation capacity remains weak. Higher debt loads, lower government revenue, and higher interest costs will increasingly challenge debt affordability. Contingent liabilities from state-owned enterprises also pose an additional risk.”

However, the region’s growth recovery will vary with concentrated and energy exporting economies witnessing a slower rate due to low energy prices.

“Non-energy commodity exporters in East Africa and West Africa will remain the most dynamic economies, with growth driven by domestic demand and high public investment rates. On the other hand, tourism-dependent economies will recover slowly, with lower than historical growth forecast for Kenya, Tanzania and Namibia,” reads part of the report.

The World Bank in its latest report, Sub-Saharan Africa is forecast to experience economic growth of 2.7 per cent in 2021 as it rebounds from its first recession in 25 years.

“Expectations of a sluggish recovery in sub-Saharan Africa reflect persistent COVID-19 outbreaks in several economies that have inhibited the resumption of economic activity,” a World Bank statement said.