COVID-19: Sub-Saharan Africa GDP growth rate to decline to 1.9%

Growth of Sub Saharan African country will dip by 0.2% to 1.9%, reflecting macroeconomic risks arising from moderating oil prices and the global spread of Covid-19.

“While the number of confirmed Covid-19 (coronavirus) cases in Sub Saharan Africa remains low—there were just 12 cases in five states, as of March 9—African markets remain vulnerable to rising risk-off sentiment, tightening financial conditions and slowing growth in key trade partners”, ratings agency Fitch said.

Markets with pegged or heavily managed currencies are also vulnerable, particularly given that regional oil exporters such as Nigeria and Angola are pre-eminent among them, while states with twin deficits and a heavy reliance on China and commodity production—such as Ethiopia—face considerable headwinds in 2020, Fitch said in a statement.

It explained further that the sharp decline in global oil prices resulting from the failure of OPEC+ to reach agreement on additional production cutbacks will undermine growth and export earnings in the region’s main oil producers—Nigeria, Angola, South Sudan, Congo Brazzaville, Equatorial Guinea, Gabon, Ghana, Chad and Cameroon.

The report focused on markets most obviously at risk, whether because of dependence on oil as a source of export earnings or fiscal revenue, limited scope for policy responses, or existing economic or political fragility.

“As Sub-Saharan Africa’s largest exporter of crude oil, Nigeria’s short-term growth outlook has been dampened significantly following the collapse in global oil prices. Oil production and revenues have regularly fallen short of the government’s expectations, and this underperformance—alongside a large public sector wage bill and rising debt servicing costs—has constrained public investment over recent years. We expect this to remain the case.”

Fitch had predicted that Ghana’s real growth rate will reduce by 0.3% to 6.2% in 2020.

This is against the previous 6.5% forecast for this year. However, 6.2% is still good for the country. It explained that given a slowdown in hydrocarbons production growth, it expects headline real GDP growth of Ghana to decelerate slightly, which has been a key driver of headline expansion since 2016.