Assessing the impact of COVID-19 induced rating downgrades on Eurobond yields in Africa
Author(s):
Misheck Mutize
Article history:
Received: 2nd October, 2020
Accepted: 21st March, 2021
Abstract:
The world economies have been shaken by the coronavirus (COVID-19) and its impact has been far-reaching. Global institutions such as the International Monetary Fund (IMF) and the World Bank (WB) have estimated that it will take at least 3 years for the world economies to recover from the effects of the pandemic (IMF, 2020a). The global economic outlook is estimated to shrink by -3.2 percent, with African economy expected to shrink by -1.6 percent, the first negative growth in nearly two decades (IMF, 2020b). Sovereign debt is estimated to rise to above 100 percent of Gross Domestic Product as African countries borrow to support fiscal stimulus packages and safety nets for the vulnerable population. Countries across the globe have gone into length periods of unprecedented national lockdowns in order to stop the spread and to contain the virus. For African countries, this has been strenuous given a myriad of other challenges the continent is facing; falling global commodity prices, general subdued demand, falling oil price, increasing protectionism and other socioeconomic challenges – poverty, inequality and unemployment.
Keywords:
COVID-19; Africa; sovereign downgrades; Eurobond; procyclical; regulation.
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