Overall, we expect moderate increases in both private consumption and gross fixed capital formation in 2022 at 2.9% and 4.9% respectively, contributing a respective 2.7pp and 0.5pp to headline growth. While in August 2021 the Central Bank of Sierra Leone announced plans to redenominate the currency, we expect significant amounts of domestic currency will likely continue to be held outside of the formal banking sector, limiting the supply of money and the recovery of economic activity. That said, the ongoing shortages of domestic currency will cap private sector growth. In turn, increased private sector profitability will likely boost the recovery in labour market conditions and household disposable income over the coming quarters. We expect reduced stringency of Covid-19 restrictions will reduce logistical disruptions and increase economic activity, particularly in the services sector, which accounts for approximately 29.0% of GDP. We forecast strong real GDP growth of 4.8% in 2022, well above the Sub-Saharan Africa average of 3.7% (see chart below). All told, despite positive base effects from the 2.7% contraction in 2020, we expect real GDP growth will remain well below the 2010-2019 average of 5.1%.Įconomic Growth Set To Accelerate In 2022 While we expect the gradual relaxation of Covid-19 restrictions throughout H221 will have boosted economic activity, scarring effects, including elevated levels of poverty (approximately 53.0% of the population live below the poverty line of USD1.25 per day) will limit consumer demand for non-essential goods and services over H221. According to the World Bank’s Business Pulse Survey, business sales in March 2021 were 38.6% below year-earlier levels (Sierra Leone introduced Covid-19 restrictions on April 1 2020). The ongoing Covid-19 pandemic has continued to weigh on private sector activity. That said, a tepid recovery in the non-mining sectors means that headline growth will remain below recent trends. Sierra Leone To Outperform SSA Average In 2021-2023Į/f = Fitch Solutions estimate/forecast. We forecast strong real export growth of 32.9% y-o-y (following a 10.3% contraction in 2020), and consequently expect net exports to be the largest contributor to Sierra Leone’s headline growth, at 2.9 percentage points (pp). We expect the strong rebound in Chinese private sector activity (we forecast China to record real GDP growth of 7.8% in 2021 up from 2.3% in 2020) will boost demand for Sierra Leone’s minerals. China is believed to be Sierra Leone’s largest trade partner and the principal global importer of iron ore, importing approximately 75.4% of global iron ore trade in 2020. In addition, ongoing economic recoveries in key export destinations will likely continue to bolster external demand for key exports such as iron ore. The Tonkolili project is Africa’s second-largest iron ore mine and the recommencement of production underpins our Mining Team’s expectation that iron ore production will increase by 850.0% in 2021. In March 2021, Kingho Mining Company began full-scale operations at Tonkolili iron ore mine (production had been suspended since June 2019 after the government cancelled the mining licence). We expect Sierra Leone will record real GDP growth of 4.1% in 2021 driven by strong mineral production and increased external demand for commodities. We expect real GDP growth will accelerate to 4.8% in 2022, as the lifting of Covid-19 restrictions strengthens labour market conditions, boosting household consumption.While an uptick in mineral exports will boost net exports and overall economic growth, a tepid recovery in private consumption will cap the rate of expansion.We at Fitch Solutions expect that Sierra Leone will record real GDP growth of 4.1% in 2021, following an estimated 2.7% contraction in 2020.
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