Q1'22 SSA Outlook - The uphill struggle
Africa has been on the centre stage recently over coups in some countries. Within the next one year, three of our coverage economies would be heading to the polls. Amid a heated political climate, we review the growth expectations of the International Monetary Fund (IMF). We find that although growth could slow in 2022, these economies could perform better than pre-pandemic levels.
Despite the recovery in these economies, pre-existing challenges are getting more pronounced from fuel subsidies in Nigeria to fiscal uncertainties in Ghana. While reform implementation could be difficult in uncertain times, rating agencies have resumed action, responding to country-specific issues and issuing downgrades where necessary. Thus, African economies may shy away from the international debt market, due to both domestic risks and international factors.
The ongoing policy support withdrawals could culminate in rate hikes by advanced economies. Emerging economies could follow suit by raising interest rates. Hawkish monetary policy stance could also support portfolio investments in economies with positive real yields. However, geopolitics could keep commodity prices elevated, resulting in pressure on non-resource-dependent currencies.
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