Emerging and frontier markets are currently benefitting from a new wave of capital inflows, after having been exposed to a more negative environment in May and August when protectionist moves by U.S. President Trump took their toll on financial markets. Overall, global monetary conditions are now easing and a large amount of bonds is again returning negative yields in advanced economies. As in 2016, frontier markets are benefiting from risk appetite and are issuing more bonds. Angola, for example, added a USD3bn Eurobond to its already quite hefty debt level (around 100% of GDP) despite its speculative grade status (B- by S&P) and a freely falling currency. As previously seen in the case of Zambia, such Eurobond issuances can become too hard to cope with (the current yield is about 20%). Overall, however, debt appears more sustainable, for example in Morocco which issued a EUR1bn Eurobond. Yet, African governments should prioritize other forms of financing, for instance using their own fiscal resources to fund growing spending needs in a more sustainable way.
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Weekly Export Risk Outlook 28 November 2019