1. Moody's projects that gradual economic recovery of 2018 will continue this year in Sub-Saharan Africa.
  2. IMF programs to support the continent's outlook and reform impetus for 2019. 
  3. Moody's says government debt ratios to deteriorate only marginally or stabilise in 2019.

Nigeria and South Africa's economies will recover slowly in 2019 but the two countries will remain well below levels seen in the first half of the decade, Moody's Investors Service said in a report today.

This, Moody's says, stem from credit challenges from fiscal and external vulnerabilities amid tightening global liquidity conditions and rising global trade tension.

According to the report, Moody's projects that real GDP growth in South Africa will reach 1.3% in 2019 from an estimated 0.5% in 2018 while growth in Nigeria will reach 2.3% in 2019 from an estimated 1.9% in 2018 – the biggest economies in Africa.

The report, "Sovereigns - Sub-Saharan Africa: 2019 outlook negative as fiscal, external challenges persist despite easing pressures,” projects that gradual economic recovery of 2018 to continue this year in Sub-Saharan Africa.

“Sub-Saharan African sovereigns' negative outlook for 2019 reflects credit challenges that stem from fiscal and external vulnerabilities amid tightening global liquidity conditions and rising global trade tensions, despite gradually improving growth prospects.

Moodyʼs Investors Service
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Daniela Re Fraschini, Assistant Vice President at Moody's, said, "Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities."

“That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels."

Moody's says 15 of the 21 sovereigns that it rates in the Sub-Saharan Africa (SSA) region have a stable outlook, while six hold a negative outlook.

The fiscal outlook for SSA

In the report, the credit rating service said the presence of IMF programs throughout the regions will support the continent's outlook and reform impetus for 2019. 

Most governments across the region plan further fiscal consolidation this year, although progress remains gradual amid still soft growth conditions in some cases.

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African nations in debt

With few exceptions, Moody's expects government debt ratios to deteriorate only marginally or stabilise in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt-to-GDP. 

Debt trajectories for a number of sovereigns remain vulnerable to lower-than-expected growth, exchange rate depreciation and contingent liability risk from weak state-owned enterprises. Debt affordability will continue to weaken in a number of countries.”

Moody's also highlighted political risk - ranging from domestic civil unrest, conflicts, succession risk, or simply from policy unpredictability - as key credit constraint for several SSA sovereigns.