Moody’s: How COVID-19 has diminished Africa’s capacity to absorb future shocks

Moody's Investors Service recently released a report detailing the lasting negative effects of the COVID-19 pandemic on the credit profiles of African countries, diminishing their capacity to absorb future shocks. In an interview with Moody's Vice President Kelvin Dalrymple, CNBC Africa delved into the main points of the report and discussed the challenges and potential paths to recovery for African economies. The key theme revolved around the downward revision of growth forecasts, adjustment of fiscal policy numbers, rising debt trajectories, and the dwindling shock absorbency capacity across the continent. Dalrymple emphasized the slow and arduous path to recovery, underlining the risk of longer-term scarring from the crisis. The report suggests that African economies will have to grapple with the aftermath of the pandemic, including higher debt levels, larger deficits, and reduced growth prospects. Furthermore, economies heavily dependent on oil, such as Nigeria, Angola, and the Republic of Congo, have been adversely affected by the sharp decline in oil prices, leading to widened deficits and economic turmoil. Despite the challenges, Dalrymple noted some resilience in certain sectors like mining and services, providing a glimmer of hope for future growth. While Moody's refrains from prescribing specific measures for governments, the report underscores the importance of prudent fiscal management, diversification of revenue sources, and fostering economic resilience to weather the ongoing storm. As Africa navigates the turbulent waters of the pandemic, the road to recovery may be long and complex, but with strategic planning and concerted efforts, there is potential for a gradual economic rebound in the post-COVID era.