“It’s probably easier to have a look at the countries that are perhaps most at risk for example to something like Federal tapering which, for Africa, is the more immediate concern before they start to benefit from a pickup in UK and US growth,” Carmen Altenkirch, director of sovereign rating at Fitch Ratings, told CNBC Africa.
“In terms of those countries, probably the most vulnerable outside of South Africa is likely to be Ghana. They have current account and budget deficits in excess of 10 per cent of GDP. Foreign investors are particularly centred on the long end of the Ghanaian yield curve, and there’s arguably a risk that if sentiment with Ghana continues to deteriorate, you could see a further exodus out of the Ghanaian market, and further pressure on the cedi.”
Altenkirch added that a country such as Zambia, one of Africa’s major copper producers, could however benefit from a recovery in global growth. The benefit would particularly be from a pickup in Chinese growth.
Global ratings agency Fitch Ratings sees the overall ratings outlook for sub-Saharan Africa as stable despite a much higher positive outlook for the continent.
“We’ve got quite a number of countries on a positive outlook at the moment, notably Uganda, Rwanda and the Seychelles. The stories out of Uganda and Rwanda have been particularly positive,” Altenkirch explained.
“Both countries over the past decade have demonstrated very strong and robust economic growth, [and] they’ve also demonstrated sound macroeconomic policy management. These two countries, over the next 18 months to two years, could look at having their ratings upgraded if they continue in the current trajectory.”
Despite its challenges, Fitch is positive about Mozambique’s public finances and current account deficit, which have massive potential for its coal and natural gas exports. Kenya’s current account deficit is equally one to watch for.
According to Altenkirch, Foreign Direct Investment (FDI) in Kenya is however significantly under recorded. The country’s government, in conjunction with the International Monetary Fund, are nevertheless in the process better estimating FDI coming into the East African nation.
“There’s been some interesting research coming out of the International Monetary Fund, which suggest that the current account deficit in Kenya is as much as five per cent overestimated, and that’s because of money or inflows that have been inculcated into errors and emissions,” said Altenkirch.
“[These] actually should’ve been reflected in the services account. As a result, the current account deficit in Kenya averaged about 10.8 per cent in 2010 to 2012. [It] could’ve looked much more reasonable at a round six per cent.”