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NSR H1 2020 Excerpts - MEA Region: Modest growth with positive outlook

• In this evening’s cut-out of our core strategy document – The Nigeria Strategy Report, we look at the major themes that dominated Sub-Saharan Africa, Middle East and North Africa landscape over H2 2019 as well as our outlook for 2020. 

• At the beginning of H2 2019, we expected growth across SSA to slow on the back of weakness in the South African economy and slow recoveries in Angola and Nigeria. As expected, economic activities over H2 2019 remain subdued. Specifically, weak economic activities in the three largest economies continued to weigh on the region. In addition, softened global demand, droughts and falling commodity prices took a toll on smaller countries. Over in MENA, we anticipated subdued growth across the oil exporters on the back of oil production cuts, while we expected a modest growth amongst the oil importers led by expansions in Egypt and Tunisia – a fallout of favourable business reforms, ease in political risks and healthy tourism. As expected, growth in the region came in at a modest pace largely supported by growths across the oil-importers. Currencies across the SSA region came under pressure over H2 19 owing to varying factors. On the other hand, the currencies of majority of the oil-importers’ in MENA strengthened against the greenback following improved current account balances. In addition, some of the countries began to gain benefits of agreements with IMF, which has seen investors’ confidence improve. 

• Growth across the SSA region is expected to tick higher in 2020 but remain subdued. According to IMF, growth is forecasted to come in at 3.6% in 2020 from 3.2% in 2019. The growth outlook is hinged on the expectation of steady improvement in private consumption/investment and continued support from monetary policy in countries adopting an easing policy. Meanwhile, oil output across the MENA oil exporting countries will be dragged by continued oil production cuts. Nonetheless, increased government spending in some countries will drive non-oil growth and invariably overall economic growth. Consequently, oil exporters are expected to grow by 2.1% in 2020 (2019: -1.3%). For oil importers, real GDP growth is expected to settle at 3.7% from an estimated 3.6% in 2019, largely driven by resilient growth in Egypt. Overall, GDP for the MENA region is expected to come in at 2.7% in 2020 from 0.5% in the previous year.