Sub-Saharan African Economy Outlook is Negative, to Contract by 2.1% in 2020

Fitch Ratings has predicted that growth in the Sub-Saharan African region would contract by 2.1 percent in 2020 due to the COVID-19 pandemic.

In the report released on Monday and titled ‘Outlook on Sub-Saharan Sovereigns is Negative’, it said because of the excessive decline in oil price, the global shock has had a strong impact on the region.

The report said, “Fitch forecasts the median real gross domestic product for rated SSA sovereigns will contract by 2.1 per cent in 2020, before returning to growth at four per cent in 2021, which is barely above trend growth.

“The global shock has had a strong impact on the SSA region via commercial and financial linkages, and domestic containment measures – with many countries imposing lockdowns and curfews – have caused severe disruption to economic activity in many countries.

“The shock has hit the main African oil exporters –Angola, the Republic of Congo, Gabon and Nigeria – particularly hard given their high reliance on oil revenue for fiscal and external financing and the indirect dependence of the non-oil sector on oil revenue.”

Fitch also said nations liked Cabo Verde and Seychelles that depend on tourism were severely affected.

It, therefore, noted that oil price shock due to the COVID-19 pandemic has led to rating downgrades of seven of the 19 rated SSA sovereigns.

“Four sovereigns in the region have negative outlooks on their rating, which is unusually high, pointing to continued downside risks to ratings,” it said.

However, the agency explained that only Cote d’Ivoire has a positive outlook.

Fitch said the decline in revenue generation, coupled with an increase in health sector spending would lead to a surge in deficits and debt levels in 2020 in the region, and debt would continue to rise in 2021 for a majority of countries.