Ratings agency Moody’s said that fiscal risks and political constraints to economic reform in South Africa were reflected in its current credit rating of one notch above speculative grade but maintaining that the level depended on how quickly government can implement promised reforms.
“A lot of the deterioration we have witnessed is embedded in the ratings level and the past downgrades. The question of course, is going forward. Our expectation is stabilization in debt,” said Moody’s lead analyst for South Africa Lucie Villa at a credit conference.
Moody’s further trimmed its economic growth forecast for South Africa to 0.7% in 2019 from a June forecast of 1.0%, but kept its 2020 forecast at 1.5%.
South Africa currently has a Baa3 rating, the last step before “junk”, with a stable outlook.
Moody's is the only major credit rating agency that still reckons South African bonds are "investment grade". The two other big ratings agencies, Fitch Ratings and S&P Global, lowered South Africa's credit rating to "junk" in April 2017.
Moody’s is expected to deliver its next review of South Africa’s rating in November after National Treasury has tabled its medium term budget statement.