Sub-Saharan Africa faces downside risks

27 November 2014

Sub-Saharan Africa faced downside risks because of its links to China’s economy, ratings agency Moody’s Investor Service said on Tuesday.

Countries demonstrating strong regional trade links faced lower risk than those that relied on commodity exports, said Matt Robinson, vice president and senior credit officer at Moody’s.

“The importance of China for sub-Saharan Africa as an export destination has risen to be almost on par with traditional European trading partners.”

This reflected greater trade integration and a near-doubling in sub-Saharan Africa’s share of global trade over the past decade.

Moody’s expected Chinese growth, one of the drivers of global gross domestic product, to be between 6.5% and 7.5% in 2015, but a slower than expected expansion would further undermine global economic prospects.

Robinson said sub-Saharan Africa could be negatively affected by a sharper-than-expected slowdown in China or further deterioration in commodity prices.

The negative effects followed from commodity exporters’ significant trade linkages and China’s significant contribution to some African countries’ foreign direct investment.

In contrast, countries with strong intra-regional trade linkages, such as Uganda, Kenya and Namibia, or those with trade linkages with Europe, such as Botswana, were less vulnerable to China-related risks.

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