Fitch Ratings remains optimistic on Sub-Saharan Africa's growth, despite the risks that may occur from any tapering of quantitative easing by the US Federal Reserve.
Although the international ratings agencies have been pessimistic about Ghana – because of debt and deficit concerns – which have led to downgrades and/or Ghana's debt being placed on negative outlook, the most recent Sub-Saharan Africa (SSA) release from the Fitch ratings agency, which downgraded Ghana's debt rating in October, is generally positive.
Among other things, Fitch expects overall SSA's GDP growth to increase during 2014 to around 5.1% for the year. Fitch, rather than touting the usual commodities story, notes the progress on Africa's public infrastructure and infrastructure spending and successful use of dollar Eurobond financing. On the downside, Fitch sees the tapering by the US Federal Reserve of its “quantitative easing” programme as presenting the biggest risk to Africa's economies.
On the ratings front, Fitch maintains a “stable” overall rating outlook for 2014, with more SSA countries (compared to one year ago) having (i) a positive ratings outlook and (ii) a stable ratings outlook, and fewer having (iii) a negative ratings outlook.
Ghana, according to Fitch, was one of the three out of 16 SSA countries that was downgraded; the others being South Africa and Zambia while only one country was upgraded. Unfortunately, Fitch highlights Ghana as the 2013-downgraded country in which fiscal deterioration is “most evident” because of its “double digit twin deficits”, increasing debts, and unlikely-to-be-attained “fiscal consolidation” targets. Ghana, according to some, not only faces high deficits and debt but is also rapidly becoming a worst-in-class performer on key economic metrics; a sobering thought for the new year.
© 2013 Menas Associates
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