Moody's: SA escapes junk status, outlook changed to negative

This decision by Moody's comes shortly after Finance Minister Tito Mboweni's medium-term budget speech. Courtesy #DStv403

JOHANNESBURG - Ratings agency Moody's has downgraded South Africa's credit ratings outlook from stable to negative.

The long-term foreign currency and local currency issuer ratings, remain the same at BAA3. 

Moody's says the decision to change the outlook was a reflection on the financial deterioration. 

READ: Moody's looking 'very carefully' at fiscal stance: Mboweni

The agency also pointed out the risks of South Africa not being able to stop the fall through a revival in economic growth or fiscal consolidation measures.

“South Africa’s high unemployment, income inequality and related social and political challenges have proven to be a greater obstacle to government plans to raise potential growth and contain fiscal deficits than we expected a year ago. We have revised our medium-term GDP growth projections for South Africa to 1%-1.5%, down from earlier expectations of a gradual increase to 2.5%-3%,” Moody's said.

Government's plans to stimulate growth were more severe than a year ago.

SA drowning in debt: Mboweni

Issues of public debt, high inequality and the financial distress of SOEs remain in place. 

Treasury has responded by saying the rating now means that South Africa has an even more narrow window to carry out reforms.

Source
eNCA