Moody’s changes SA outlook to negative

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Moody’s Investors Service has changed its outlook on South Africa’s credit ratings from stable to negative but has affirmed the B-aa3 long-term foreign and local currency issuer ratings.

The B-double-A-three rating affirmation takes into account the country’s deep, stable financial sector and robust macro-economic policy framework.

These are set against the on-going challenges related to weak potential growth and strong fiscal pressures.

Moody’s says the challenges the government is facing are evident in the continued deterioration of the country’s economic growth and public debt burden despite on-going policy responses.

Ratings Analyst Saveshen Pillay says a downgrade to junk status would have added a burden to South Africa’s already poor economic performance.

“If you look at all the countries that have been downgraded that have lost their final investment grade rating and you look at what happened to those economies; the things that stand out are that the foreign direct investment drops within the year after the investment decision. That would obviously be a negative force because President Ramaphosa is on a drive to bring foreign investment in,” says Pillay.

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