Moody's Gives Negative Rating to Sub-Saharan Africa

Rating agency Moody’s has given a negative outlook to several countries in sub-Saharan Africa for 2017 against a backdrop of the liquidity stress facing commodity-dependent countries, subdued economic growth, and persistent political risk.

The agency says this negative outlook reflects its expectations for the fundamental credit conditions that will drive sovereign credit in this region over the next year and a half.

“Sub-Saharan Africa’s economies will continue to face commodity-induced liquidity stress in 2017, with recurring fiscal deficits amid challenging financing conditions. These will remain important credit constraints and underpin our negative outlook for sub-Saharan Africa sovereigns overall,” said Lucie Villa, a Moody’s senior analyst and co-author of the report.

The negative pressures on sub-Saharan Africa’s sovereigns were reflected in numerous negative rating actions last year that saw a third of the region’s 19 rated economies drop by an average of around two notches.
This compares with 29 countries globally downgraded by an average of slightly more than one notch. Five of the seven countries downgraded in sub-Saharan Africa carry negative outlooks, underscoring Moody’s view that pressures that led to rating downgrades will persist this year.

The negative impact on liquidity from the oil and commodities price shock will primarily be concentrated in Gabon, Mozambique, the Republic of the Congo and Zambia, but will also be evident in Angola and to a lesser extent in Nigeria.

By contrast, rapid growth in Ethiopia, Ivory Coast and Senegal and East African countries such as Uganda, Kenya and Rwanda, will continue to benefit from public capital spending and low oil prices. In the latter case, however, growth will be supported at the cost of a rise in government indebtedness, while in the former, rapid growth will occur in parallel with government debt stabilisation.

The rating agencies also expect political risk to continue to be a credit constraint in parts of sub-Saharan Africa in 2017, with potential for civil unrest in countries that hold presidential elections in 2017 and 2018 such as the Democratic Republic of the Congo and Rwanda.

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