Ratings downgrade will hit consumers hard

File: South African consumers will be hard hit as the country's credit rating is pushed further into junk status.

Pixabay/Chronomarchie

JOHANNESBURG - South African consumers will be hard hit as the country's credit rating is pushed further into junk status.

Moodys and Fitch both pushed the country further into junk status, citing rising debt levels and risks to implementing reforms.

The move further southwards into sub-investment grade means South Africa's cost of borrowing may rise.

Both agencies maintained their negative outlook, with Moody's now placing South Africa at two notches into junk, and Fitch moving South Africa three notches below investment grade.

READ: Moody's, Fitch further downgrade South Africa

S&P Global has not moved on either its outlook or grading.

One analyst says consumers won't escape the effects of the credit ratings downgrade by both Moody's and Fitch.

Stanlib chief economist, Kevin Lings says as loans become costlier for government, consumers will also feel the pinch from higher borrowing costs.

"It creates some pressure for the Reserve Bank because the Reserve Bank will be mindful now that we need to attract all the investment we can and importantly retain the foreign investment that we got," Lings said.

"One of the ways to do is that to unfortunately keep the interest rate very high."

Source
eNCA