Sub-Saharan Africa's (SSA) exposure to the slowdown among trading partners in developed countries is expected to be partially offset by the growing re-orientation of its trade towards the more dynamic emerging economies, says Moody's Investors Service in a Special Comment published on Tuesday.
However, the influence of unrest in the north of the continent presents additional risks to the region's political stability and is affecting SSA governments' socio-economic policy decisions, which in turn exert intermittent pressure on public finances.
Buoyed by strong domestic economic activity and elevated commodity prices, SSA's economy is expected to expand by 5.4% in 2012, up from 5.1% the previous year. Continued strong growth will help bolster SSA's economic resiliency and, in turn, will attract growing investments into more diverse sectors of the region's economy.
However, Moody's notes that most countries in the region have yet to sufficiently rebuild financial buffers necessary to shield their economies from the adverse effects of a more pronounced global economic downturn. The rating agency expects progress in this regard to be mixed across the region, with some countries better able to take advantage of elevated commodity prices to boost fiscal and external cushions, while others will be constrained by weak growth environments.
Moody's also notes that external developments such as the Arab Spring unrest and the associated political transitions in the north of the continent entails some spill-over risks of political instability in the short term for the SSA region. However, the rating agency notes that improving governance and political legitimacy in SSA significantly contain the risk of widespread domestic political instability.
The new report provides Moody's assessment of individual country credit-risk profiles for rated SSA countries namely: Angola (Ba3/stable), Botswana (A2/stable), Mauritius (Baa2/review for possible upgrade), Namibia (Baa3/stable), Senegal (B1/stable) and South Africa (A3/negative). It also provides an assessment of the risk profiles for Kenya and Nigeria (both unrated), which, in addition to South Africa, are the other two key regional drivers of SSA's performance.