Moody's: South Africa's long-term growth outlook remains weak
SA's rating will depend on Moody's assessment of how well Cyril Ramaphosa's government tackles challenges.
Moody’s Investors Service has released a statement saying that South Africa’s long-term growth outlook remains weak with its fiscal strength deteriorating.
However, the statement also said that the country’s proven resilience to absorbing financing shocks still supports the economy’s current credit profile of “one notch above junk”.
According to the statement, South Africa has various strengths, including a favourable government debt structure, a large pool of domestic investors and a diversified economy that “insulate its credit profile from shocks and provide some time for policies to emerge that will address those challenges.
“However, in the absence of effective policy change, the sovereign’s credit profile will most likely continue to erode, with fiscal strength weakening and growth remaining low,” Moody’s warned.
It further read that the country’s rating would be put under pressure by fading prospects of policies that will sustain fiscal and economic strength, along with any signs of diminishing resilience to shocks.
South Africa’s foreign debt status, which is currently rated junk by S&P Global Rating and Fitch Ratings, largely depends on Moody’s assessment of how the government approaches the fiscal deficit and financial troubles of state-owned companies now that Cyril Ramaphosa has been elected president.