(Agence Ecofin) – The decline in inflationary pressures and the easing of financial conditions should gradually reduce financing costs in the region, but political and climatic risks could weigh on the region’s economic prospects.
Sub-Saharan Africa is expected to record economic growth of 4.2% in 2025 compared to an estimate of 3.8% in 2024, estimated the financial rating agency Moody’s Ratings in a report published on Wednesday January 8, 2025.
Titled « Sovereign – Sub-Saharan Africa: 2025 outlook stable as financing conditions improve; but debt costs still high »the report specifies that the region’s average economic growth is expected to be higher than that recorded over the last decade, which was marked by several endogenous and exogenous shocks such as the fall in commodity prices during the period 2014- 2016, the covid-19 pandemic and the surge in inflation following the outbreak of the Russian-Ukrainian conflict.
The expected increase in growth during the current year should notably result from easing financial conditions, increased investments in infrastructure and the energy sector, the acceleration of the pace of economic reforms and the expansion of the service sector.
Moody’s analysts note that lower inflation and lower policy rates by the world’s major central banks will support a general trend of monetary policy easing in the region, which would allow a gradual reduction in financial costs. funding. However, these costs are expected to remain higher than in the pre-covid-19 period. Thus, constraints linked to the availability of financing will persist for a certain number of States, while the high financing needs necessary to service the external debt in relation to usable foreign exchange reserves will constitute another source of sovereign risk. A sustained appreciation of the dollar in 2025 could also increase the cost of servicing debt in foreign currencies.
The US agency further noted that South Africa and Nigeria, the region’s two largest economies, will continue to implement economic reforms that will strengthen their creditworthiness and growth prospects.
“For South Africa, improvements will be gradual, despite a significant reduction in power cuts and load shedding, while Nigeria should continue its efforts to establish a more efficient foreign exchange market “, she stressed.
Economic growth in Angola and the Republic of Congo is also expected to strengthen in 2025, thanks in particular to the exploitation of new oil and gas projects which will offset the decline in production from aging fields.
Moody’s also expects foreign direct investment flows to remain significant towards countries producing raw materials necessary for the energy transition, such as the Democratic Republic of Congo and Namibia.
However, climate risks will weigh on the economic prospects of certain countries, such as the persistence of the drought which has disrupted hydroelectric and mining production in Zambia, canceling out the benefits of rising copper prices.
-Political risks could also jeopardize stability in other countries such as Ivory Coast, which will hold elections in October 2025 in which President Alassane Ouattara could seek a controversial fourth term, and Mozambique, where the opposition continues to contest the victory of the candidate of the ruling party during the presidential election of October 9, 2024.
Walid Kefi
Edited by MF Vahid Codjia
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