Fitch says macro stability in Sub-Saharan Africa supports stable outlook

By bne IntelliNews December 16, 2013

Growth in Sub-Saharan Africa will pick up in 2014, helped by recovery in Europe, but financial market turbulence due to U.S. Federal Reserve reduced bond-buying programme could pose challenges for the sovereign ratings, Fitch Ratings said in its 2014 outlook report for Sub-Saharan African sovereigns. It estimated the overall rating outlook of the region as stable.

Fitch expects that the region’s GDP growth will pick up slightly in 2014, to average 5.1% with the growth outside South Africa, the largest but also the slowest growing economy in the region, rising to 6.3%.

The decision of the U.S. Federal Reserve to reduce bond-buying caused a gap in Eurobond issuance since May, but two of the countries in the region – Nigeria and Ghana, placed new issues on the market several months later.

Fitch said it considers the overall rating outlook for the region as stable as of the 16 ratings in the region, 69% of outlooks are stable, up from 60% a year ago, 25% are positive compared to 20% a year ago and 6% are negative compared to 20% last year. Three countries gained positive outlook in 2013 - Rwanda, Seychelles and Uganda, and one was assigned a negative outlook - Cape Verde. However, downgrades of Ghana, South Africa and Zambia outweighed the one upgrade of Mozambique.

The biggest external risk to the region in 2014, according to Fitch, will come from the U.S. Federal Reserve reduced bond purchase. The main domestic risk could come from over-loose fiscal policy. Elections in 2014 in South Africa, Mozambique and Namibia are unlikely to bring significant changes in policy.

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