Monday , January 17 2022

Increase in foreign currency debts is a major concern for Sub-Saharan Africa: QNB


(MENAFN – Gulf Times) Despite the general recovery in growth, the rise in foreign currency debt to most countries in sub-Saharan Africa (SSA), driven by an investor demand for a higher product and investment needs huge for infrastructure and social QNB developed in economic commentary.
The SSA activity has strengthened and expected 3.1% GDP growth in 2018 of 2.7% in 2017, QNB stated.
Given the large number of countries in the SSA, QNB has focused its analysis on the economies that are either better performers or substanders in relation to the macroeconomic background regional.
The analysis has expanded on the two largest SSA economies – Nigeria and South Africa – which have seen poor growth despite recovery in goods prices, and Ethopia and Ghana, which are considering the QNB & # 39; regional growth champions.
Nigeria and South Africa account for almost 50% of the continental GDP. Both countries are a resource-intensive economy and have been struggling to achieve stronger growth since the end-2014 goods price shock.
At the time, Nigeria's nominal net oil exports and South Africa's external revenues fell from platinum, iron ore and coal.
After the first output cut in more than two decades in 2016 and a 0.8% slow growth in 2017, Nigeria extends to an economic expansion of 1.9% in 2018. The main drivers for recovery have been raising oil prices , more stable hydrocarbon output and agricultural sector.
Higher oil prices have been supporting current accounts surpluses and reducing the deficit. Along with the publication of bonds and other portfolio inflows, this has contributed to ramping the external reserves and maintaining the new FX regime.
The prospects show a better performance in 2019, but growth is expected to be a subdivision at 2.3%, says QNB.
The risks are dropped to the disadvantage as oil prices are expected and oil output impairments are a potential threat to an activity.
Despite higher product prices and new leadership stimulating reform optimism and a more business friendly agenda, the expansion of South Africa has weakened in 2018, QNB said.
The growth of the GDP is expected to slow to 0.8% this year from 1.3% in 2017. The weakness is led by the agricultural, transport and retail sectors, and recent quarterly restrictions have decreased the country even in the recession first technical since following the great financial crisis in 2009.
Structural current account deficits are running, South Africa is vulnerable to foreign investors and has hit by limiting global financial conditions and FX violence in emerging new markets (EM ). Large portfolio outflows have increased and South Africa's edge drops from 16.7% against the USD so far this year.
And the scenario is more positive for 2019, QNB said.
Recovery in the agricultural sector and clear financial policy should grow to 1.4%. However, risks are also dropped to the disadvantage as goods prices are particularly sensitive to global weakening growth and normalizing financial policy in key developed economies can generate further pressure in HM funds, enforcing & Central bank to withdraw financial policy.
Ethiopia and Ghana are the most significant economic performers in the continent. Ethiopia is often referred to as China's Africa & and has been constantly performing as one of the fastest growing economies in the world since the beginning of the 2000s. With rooted political stability and a diverse and rich natural resource base, including crude oil and gold, Ghana has also introduced long-term growth rates much higher than the SSA average.
Ethiopia plans to introduce another year of strong growth, and the activity is expected to expand 7.5% in 2018. Foreign direct investment (FDI) in infrastructure and manufacturing continues to lead the way to rapid industrial expansion.
Strong domestic activity, abducted by large infrastructure and investment spending, contributes to further internal and external imbalances. Export-focused projects take longer to get started while imports are rising and the balance of the budget gets worse. Ethiopia's current trade deficits and accounts are expanding. But the government has managed to fund some of the deficits with foreign capital, especially FDI associated with new industrial and privatized parks programs.
The prospect for 2019 shows a very strong actual growth of 8.5%, QNB stated.
With lower labor costs than most African peers, Ethiopia is expected to continue attracting foreign investments in key job production sectors such as textiles and shoes, which should support a phased move towards an economy focus on export.
The Ghanese economy has conflicts and it is expected to grow moderation in 2018 to 6.35% by 8.4% rapidly in 2017. Major growth drivers include hydrocarbon production and support from higher product prices, especially crude oil and coconut.
Financial deficits have been circulated but current shortcomings are narrowing on the back of stronger external revenue. Growth is expected to accelerate to 7.6% in 2019. Risks are dropped to the disadvantage as goods prices stimulate touch next year.
Despite the general recovery in growth, a large common concern for most countries in the SSA is the increase in foreign currency debts, driven by an investor demand for a higher product and huge investment needs for infrastructure and social development. Tightening the EU's financial policy will increase the risks of refinancing and span the SSA boundary markets. Portfolio earnings were strong in the first half of 2018 with the Eurobonds record publications. This adds to last year's sovereign issuance boom in Africa.
Over the medium to long term, the SSA sovereignty would need to rely more on domestic and tax revenue to tackle sustainable economic development in risk-adjusted levels, QNB said.


Increase in foreign currency debts is a major concern for Sub-Saharan Africa: QNB

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