EM FX ended the week on a soft note, as the dollar remains resilient. While a softer US interest rate outlook benefits EM, we think this is offset by the deteriorating global growth outlook. The IMF will release its updated World Economic Outlook Monday, which is likely to highlight the growing downside risks.
Gardner Rusike, Sovereign Analyst at S&P Global, offers a brief outlook assessment of Africa’s largest markets and examines the challenges and opportunities facing the continent in 2019.
As Gabon is the fifth largest oil producer in sub-Saharan Africa, the health of its economy is tied to its hydrocarbons industry. But since the 2014 oil crash, the legislation currently governing the sector has been wholly unsuitable. Now, the government is hoping to woo international oil companies (IOCs) by revising the code; but the President’s recent illness, along with a failed coup attempt this week, are halting legislative progress, and the industry’s prospects in the African country remain hazy.
This year was not particularly forgiving for emerging market assets. Rising US interest rates and a strengthening US dollar coupled with a wider shift from quantitative easing to tightening led to broad-based repricing across the investment landscape. It was also a year that saw political and policy uncertainty, trade wars, and commodity and asset price volatility weigh heavily on market activity. What does 2019 have in store? Bonds & Loans speaks with investors to get a sense of what keeps them up at night when thinking about the year ahead, and takes a look at some of the top themes likely to dominate the EM credit landscape in 2019.
Moving forward with plans to swap its debt from local currency into dollars, Nigeria’s Federal Government successfully placed close to USD3bn in international bond markets through a widely subscribed issuance in November that saw roughly three times that amount in demand from investors. But analysts are concerned that a confluence of factors – declining oil prices, persistently poor revenue generation, slowness to reform and an increasingly volatile political environment – could arrest the optimism and capital markets momentum generated by the sale.
Newly appointed Minister for Finance, Tito Mboweni, faced a tough reception from investors when he announced his Mid-Term Budget Policy Statement at the end of October. Yet in spite of South Africa’s dire financial situation, the speech marks a potential welcome shift towards a broader reform programme for the country’s state-owned enterprises (SOEs).
Well before Robert Mugabe’s 40-year rule came to an end last year, many hoped a change in government would mark a fresh approach to addressing the structural flaws of Zimbabwe’s ailing economy. But one year on, despite the appointment of business-friendly Finance Minister Mthuli Ncube and a wide-ranging reform programme, rebalancing the fiscus remains subordinate to longstanding political sensitivities.
7 Nov 2018
Nigeria’s economy recorded better than expected private sector credit growth in the third quarter of this year, with more borrowers funnelling the proceeds towards CAPEX-related activities – despite next year’s federal election looming. We speak with Jan Friederich, a senior director at Fitch Ratings about lingering risks in the country.
With the October mini budget speech looming, South Africa’s economy and funding environment come sharply into focus; both remain in a precarious state. Analysts, investors, CFOs and Treasurers who spoke with Bonds & Loans on a recent research trip to the region emphasise that the way in which the macro environment evolves, and the way in which the government tackles key issues like land reform, will to a great extent dictate the country’s trajectory over the near, medium and long-term.
- Fitch Sees Investment Driving Growth in East Africa, Warns of Rising Levels of Debt
- African Trade Insurance Agency: Sovereign Debt, Current Account Balances Need Watchful Eye
- Eskom is Running Out of Options – and so is the Government
- 2019 Elections Weigh on Nigeria’s Outlook Despite Broad Economic Improvement
- Idiosyncratic Challenges Weighing on East Africa’s Local Bond Markets Growth
15 Jan 2019