The economic outlook for the region is subject to significant downside risks, including the following on the external front:
• In Sub-Saharan Africa, sovereign bond issuance has become a key financing strategy in recent years, as countries have looked to global financial markets to facilitate domestic investment. Higher global interest rates could narrow the scope for this financing. Sustained increases in global interest rates could reduce the ability of governments in the region to raise this level of finance.
• Weakening of growth in advanced economies or emerging markets could reduce demand for exports, depress commodity prices, and curtail foreign direct investment in mining and infrastructure. Oil and metals exporters are particularly vulnerable to this risk, given their less diversified economies.
• The change in government in the United States following the elections in November 2016 is not expected to have major effects in the region. However, there is a risk that the United States will cut back official development assistance. This will hurt the region's smaller economies and fragile states, which have strong economic ties with the United States.
Risks on the domestic front include the following:
• In countries where significant fiscal adjustments are needed, especially in CEMAC countries, failure to implement appropriate policies could weaken macroeconomic stability and slow the recovery.
• Worsening security, drought conditions, or political uncertainty ahead of key elections pose risks to the outlook for some countries, including Kenya, Nigeria, and South Africa.