Friday , August 12 2022

Increase in foreign currency debts, a major concern for sub-Saharan Africa debt: QNB


(MENAFN – Gulf Times) Despite the recovery in growth, there is a significant concern for most countries in sub-Saharan Africa (SSA), the increase in foreign currency debts, investors demanding higher yields, and enormous investment needs for infrastructure and social. development, QNB said in an economic comment.
QNB noted that SSA activity is strengthening and GDP growth of 3.1% of GDP in 2017 will be 3.1% of the GDP growth rate of 3.1%.
In view of the large number of countries in the SSA, QNB has focused its analysis on either regional macro-economic backgrounds or on economies with superior performance or poor performance.
The analysis addressed two of the two largest SSA economies – the Nigeria and South Africa – and Ethiopia and Ghana, which QNB considered the regional growth champion – despite the recovery in commodity prices.
Nigeria and South Africa account for almost 50% of the continent's GDP. Both countries are resource-intensive economies and are struggling to achieve stronger growth since the commodity price shock at the end of 2014.
At that time, the nominal net oil exports of Nigeria collapsed and South Africa's foreign revenues from platinum, iron ore and coal decreased.
In 2016, Nigeria, which recorded a growth rate of 0.8% in 2017 after a first contraction of more than two decades and in 2017, entered into a process of economic expansion of 1.9% in 2018. . The main elements of recovery have been increased oil prices, more stable hydrocarbon production. and the agricultural sector.
Higher oil prices support both the current account surplus and the contraction of the fiscal deficit. Together with bond issues and other portfolio inflows, this contributed to the increase of external reserves and the maintenance of the new exchange rate regime.
The outlook shows better performance in 2019, but growth is expected to remain at 2.3%, QNB.
As oil prices are expected to shift and risks of oil production cuts down, risks posed a downside.
QNB has led to weakening of South Africa's expansion in 2018, despite high commodity prices and a new leadership reform leading to optimism and a more business-friendly agenda.
GDP growth is expected to fall from 0.8% this year to 0.8% in 2017. Weakness is led by the agriculture, transport and retail sectors and, following the last quarter's contraction, has dragged the country to its first technical stagnation. Financial crisis in 2009.
South Africa, which carries out structural current account deficits, is sensitive to foreign investor sentiment and has been affected by tightening global financial conditions and currency fluctuations in other emerging markets (EM). Large portfolio outflows dominated and the South African rand decreased 16.7% against the US dollar this year.
QNB, & # 39; scenario for more favorable & # 39; said.
An improvement in the agricultural sector and loose fiscal policy should bring growth up to 1.4%. However, as commodity prices are particularly sensitive to weakening global growth and normalization of monetary policy in emerging economies may exert more pressure on the EM currencies that are pushing the central bank to tighten monetary policy in currencies, risks also move down.
Ethiopia and Ghana are the most important economic exit points of the continent. Ethiopia is often referred to as büyüyen Africa's China Et and has been consistently performing as one of the fastest growing economies in the world since the beginning of the 2000s. With deep-rooted political stability and a diverse and rich natural resource base, including crude oil and gold, Ghana has also offered long-term growth rates far above the SSA average.
Ethiopia is preparing to offer a strong year of growth in 2018, with activities expected to grow by 7.5%. Foreign direct investment (FDI) in infrastructure and manufacturing continues to pave the way for rapid industrial expansion.
Strong internal activity stemming from major infrastructure and investment spending contributes to more internal and external imbalances. Export-oriented projects are spreading faster, import increases and budget balance are worsening. Ethiopia's trade and current account deficit is expanding. However, the government has succeeded in financing some of the deficits with foreign capital, especially foreign direct investments associated with new industrial parks and privatization programs.
QNB noted that the outlook for 2019 was a strong strong growth of 8.5%.
With lower labor costs than most African peers, Ethiopia is expected to continue to attract foreign investments in key business-producing industries such as textiles and footwear, which should support a gradual move towards a more export-oriented economy.
The Ghanese economy is recovering and growth is expected to be moderate in 2017 from 8.4% in 2017 to 6.35%. Major growth factors include support for hydrocarbon production and higher commodity prices, particularly crude oil and cocoa.
The fiscal deficits expanded, but the current account deficit contracted due to strong external revenues. Growth is expected to rise to 7.6% in 2019. As commodity prices should soften a touch next year, risks are leaning down.
Despite the overall recovery in growth, an important common concern for most countries in the SSA is the increase in foreign currency debts, investors demanding higher yields, and enormous investment needs for infrastructure and social development. US monetary policy tightening increases the risks by refinishing the SSA's border markets. Portfolio inflows were strong in the first half of 2018 with record releases of Eurobonds. This added to the exploding sovereign export boom in Africa last year.
In the medium and long term, QAB said that SSA countries should rely more on local and tax revenues to address sustainable economic development at risky levels.


Increase in foreign currency debts, a major concern for sub-Saharan Africa debt: QNB

Source link