The impact of the coronavirus has caused the American credit rating agency, Moody’s, to downgrade the banking systems in South Africa, Nigeria and Morocco from stable to negative. The rating agency that the virus will deteriorate the banks’ assets and hinder further economic growth in these countries.
The actual case number of coronavirus for the continent of Africa is less than 1% of the reported 3 million confirmed cases of the virus worldwide.
However, the continent’s reliance on exports has been impeded by the global shutdown which will affect the overall African economy moving forward according to an article on CNBC.com
In South Africa, to offset the economic concerns for the future, the government has unveiled the largest fiscal stimulus package in the country’s history, $26 billion, in hopes of mitigating the economic fallout from the global pandemic.
South Africa was already facing a failing sovereign debt profile and a recession prior to the pandemic, and now the impact from the coronavirus is expected to weaken the banking system’s creditworthiness.
To help soften the economic backlash from the virus, the government approached the World Bank, International Monetary Fund, BRICS New Development Bank and the African Development Bank for help with its loan financing.
Nigeria, Africa’s largest economy, has been struggling with falling oil prices, direct exposure to the pandemic, foreign cash-flow issues and a weakened loan quality program on top of rising regulatory costs.
To help combat the economic tailspin, the country did receive emergency funding in the largest loan ever granted in Africa, $3.4 billion, from the IMF.
The impact of the pandemic on Morocco is exacerbating the already existing challenges to the country’s agriculture segment which has been hard hit this year due to low rainfall. Moody’s report indicates it expects future issues to occur in Morocco surrounding loans to the country’s small-to-medium business enterprises.