The Institute of International Finance projected Sudan's real GDP to retreat by 1.4% in 2019 following a contraction of 1.1% in 2018 due to subdued domestic demand, and then to expand by 2.3% in 2020, in case a new leadership reduces political uncertainties, and if investment and net exports pick up. The IIF said that, in the absence of access to international capital markets and of support from official sources due to longstanding sanctions, the government resorted to the monetization of the deficit, which led to an average inflation rate of 64.7% in 2018. It pointed out that the sharp depreciation of the Sudanese pound has exacerbated the increase in prices and forecast the inflation rate to average 36.5% in 2019 and 30% in 2020, even if authorities commit to a tighter monetary policy.

In parallel, the IIF projected the fiscal deficit to widen from 1% of GDP in 2018 to 1.3% of GDP in 2019, and to narrow to 0.8% of GDP in 2020, in case authorities step up fiscal consolidation efforts, including by reorienting spending and lifting inefficient subsidies. It said that the government debt level surged to 148.6% of GDP in 2018 following the sharp depreciation of the pound, as 90% of the public debt sock is denominated in US dollars. It forecast the debt level to decline from 158.7% of GDP in 2019 to 120% of GDP in 2020 in case of fiscal consolidation, but considered the lifting of subsidies to be politically challenging.

Further, the IIF projected the current account deficit to narrow from 12.6% of GDP in 2018 to 10.9% of GDP in 2019 and to 7.3% of GDP in 2020, in case exports pick up after the recent sharp depreciation of the pound. It estimated foreign currency reserves at $260m, or 0.3 months of import coverage at end-2018, and expected them to decline to $221m, or 0.2 months of imports at end-2019, but to recover to $943m, or one month of import coverage at end-2020. It said that fiscal adjustment and monetary discipline are critical to stabilize the inflation rate, mitigate external vulnerabilities and stimulate long-term growth prospects. 
Source: Institute of International Finance