Moody’s outlook for SSA negative in 2018

Moody's Investors Service recently published its Outlook report on Sub Saharan Africa for 2018, projecting a 3.5 per cent GDP growth for the region but with a negative outlook. Zuzana Brixiova, VP Senior Analyst at Moody's, highlighted the key factors contributing to this negative outlook during an interview with CNBC Africa from London. Brixiova emphasized that despite the rebound in oil prices, the outlook for the region remains negative due to subdued growth recovery, fiscal challenges, and heightened political risks. Unlike other developing regions, South Africa is not expected to benefit significantly from the more stable global growth, as commodity prices, though increased, are still relatively low. Structural bottlenecks and political uncertainties further dampen the economic prospects for the region. One of the significant risks identified by Moody's is the rapid accumulation of public debt in South Africa. Brixiova pointed out that public debt levels have surpassed 2008 levels by more than 15 percentage points in almost half of the South African countries. Factors such as loose fiscal policies, lower government revenues, and exchange rate fluctuations have all contributed to this debt accumulation. Countries with a high share of foreign currency debt and flexible exchange rate regimes, like Zambia and Uganda, are particularly vulnerable to these risks. While the rebound in oil prices may provide some relief to oil-exporting countries like Nigeria, Moody's stresses the importance of economic diversification for long-term growth. Brixiova highlighted the shift in Africa's growth dynamics from commodity exporters to importers, citing well-diversified nations in East Africa, Senegal, and Cote d'Ivoire as examples of successful economic diversification and regional integration. These countries have invested significantly in infrastructure development, albeit at the cost of debt accumulation. Despite the challenges and risks facing Sub Saharan Africa, Moody's report also notes some bright spots in the region. Economic diversification, prudent fiscal policies, and regional integration efforts are seen as key drivers of future growth and stability. However, Brixiova cautioned that these positive developments must be sustained and further supported to mitigate the impact of external shocks and challenges. Overall, Moody's outlook for Sub Saharan Africa in 2018 paints a complex picture of economic opportunities and risks. The region's growth prospects are clouded by fiscal challenges, political uncertainties, and the need for structural reforms. As African countries navigate these challenges, the importance of prudent economic management and strategic investments in diversification and infrastructure development cannot be overstated.