SSA Sovereigns Face Iran Shock from Stronger Starting Point -Fitch
Sub-Saharan African (SSA) sovereigns face the external shock precipitated by the US-Iran war from a stronger starting point than when Russia invaded Ukraine in 2022, Fitch Ratings says in a new report.
According to Fitch, improvements to monetary, fiscal and macroeconomic policy settings and metrics have enhanced the region’s resilience, but the war’s impact will test its depth and durability.
It said key transmission channels are higher costs for energy imports, possible supply shortages (notably of refined oil products and fertiliser), domestic inflationary pressures, and the cost of fiscal support measures.
“Our baseline forecasts are for real GDP to grow in all Fitch-rated SSA sovereigns this year, with the median of 4% unchanged from 2025”, the report added.
Fitch acknowledged that some oil importers are exposed to a supply shock, which may be exacerbated by efforts to prevent the full pass-through of international fuel price moves, incentivising speculative hoarding and artificially boosting demand.
“Headline inflation is rising, but often from a fairly low base, reflecting greater currency stability. Central banks are well positioned to respond as most are running positive real policy rates, despite cuts pre-war facilitated by the previously subdued inflation backdrop.
“External positions are generally stronger than in 2022, with narrower current account deficits in several sovereigns and reserves of at least three months of current external payments”, Fitch stated.
It noted that greater exchange-rate flexibility has also boosted resilience to shocks in some sovereigns. High prices for some export commodities can offset higher energy prices, depending on the composition of trade.
Revenue mobilisation efforts and subsidy reforms have strengthened public finances since 2022, but political and social pressures were, to varying degrees, already a constraint on fiscal adjustment.
Fitch said fiscal measures to ease the pass-through of energy prices have been widespread, but generally time-limited and small. #SSA Sovereigns Face Iran Shock from Stronger Starting Point -Fitch
