SSA Currencies to Worsen despite Softening Dollar
The Sub-Saharan Africa markets currencies outlook for 2023 is projected to worsen, though the United States dollar, the primary currency, has softened after the dollar index’s strong gain in 2022.
Amidst relatively high debt loads that have crossed pre-pandemic levels, the African market has been faced with large currencies devaluation – both official and market-driven, and Fitch Solutions has predicted that this is far from being over.
Exchange rates of productive economies with high dollar inflows get better and strong than a market with higher exposures to external developments, which is the pattern among key African markets, MarketForces Africa gathered from experts.
The firm said, “We anticipate a mixed performance for SSA currencies over the course of 2023, with very few appreciations among the main markets.
“We expect that the Mozambican metical will appreciate as the ongoing ramp-up of gas production in northern Mozambique boosts the country’s export receipts.
“In South Africa, persistent political uncertainty and declining metals prices will depress export earnings and see the rand continue to weaken, albeit very slightly”.
It also noted that falling commodity prices will take a toll on Nigeria, Angola and Zambia’s currencies.
“That said, the Ethiopian birr will be the region’s main underperformer in 2023 as, despite the end of the Tigray War, improving political stability, a decline in foreign reserves will prompt the central bank to devalue the birr more aggressively.
“While a softening US dollar will bode well for emerging market exchange rates, slowing global growth will cause prices of oil and industrial metals to fall in 2023, benefitting net oil importers in the region but weighing on net commodity exporters”.
With inflation remaining above historical levels, we believe that governments will seek to keep subsidies and social support measures in place, it stated.
However, the firm added pressurised fiscal accounts on the back of rising interest payments could force some governments to remove or phase out these support arrangements. # SSA Currencies to Worsen despite Softening Dollar
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