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NSR H1 2021 Excerpts - MEA Region - Reeling Through a Rough Patch

Nigeria Strategy Report – H1 2021 Excerpts

 Global Economy and Markets

• In today’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 2020 as well as our outlook for FY 2021.
• At the start of H2:2020, we expected growth in the SSA region to remain bleak over the rest of the year. Our expectation was largely hinged on the impact of travel restrictions, border closures and nationwide lockdown on the economies. This was the case as whilst there were eases in GDP contractions across the region, economies still reel from the impact of the COVID-19 pandemic. Over in MENA, we expected economies to contract as oil exporters suffered effects of lower oil receipts, whilst oil importers witnessed slower activities in the tourism sector as well as spill-over of slow economic growth in advanced economies. As expected, growth in the MENA oil exporting region remained subdued, on the back of crude oil production cuts and the pandemic effects. Currencies in the SSA and MENA posted mixed performances in the second half of 2020, as the fall in US Dollar boosted performances in some countries across the region. As some countries gained benefits from the IMF, amongst other international organizations, FX reserves were supported.
• The SSA region is expected to see a V-Shaped rebound in 2021. Regional activity dropped significantly, especially in the second quarter of 2020 due to the negative impacts of the COVID-19 pandemic on tourism, commodities, amongst other sectors. A recovery is however expected in 2021, hinged on improvements in commodity prices and exports. This recovery is however expected to be gradual and uneven across the region as there is relatively limited policy space within which to sustain fiscal expansion. This means that concerns surrounding debt sustainability caps the potential for further fiscal intervention. The IMF forecasts the SSA’s Real GDP to grow by 3.1% in 2021 (-3.0% in 2020). With local consumption and crude oil prices in 2021 expected to improve, MENA countries should recover in 2021. Oil-exporting countries are expected to witness increased energy demand, compared to 2020, while tourism and air travel picks up. The IMF expects oil exporters to grow by 3.3% in 2021 (-6.0% in 2020).