Covid-19 impact: Moody’s cuts South Africa’s credit rating to junk status.

 

Moody’s has downgraded South Africa’s credit rating to junk status, piling more anguish on an economy already in recession and battered by Africa’s worst coronavirus outbreak.

Two other major international rating agencies Fitch and S&P had cut the credit rating of Africa’s most developed economy sub-investment level in 2017.

The downgrade late Friday came as South Africa began a three-week nationwide lockdown to try halt the rapid spread of the novel coronavirus which has infected more than 1,170 people in the country.

“The key driver behind the rating downgrade to Ba1 is the continuing deterioration in fiscal strength and structurally very weak growth,” Moody’s said.

“The government’s own capacity to limit the economic deterioration, in the current shock and more durably is constrained,” it said, blaming “unreliable electricity supply, persistent weak business confidence and investment as well as long-standing structural labour market rigidities.”

The South African government said the decision by Moody’s “could not have come at a worse time,” adding that it will “further add to the prevailing financial market stress”.

“To say we are not concerned and trembling in our boots about what might be in the coming weeks and months is an understatement,” said Finance Minister Tito Mboweni.

“The President announced a number of measures to offset the COVID-19 impact on the economy and its people including a 21-day lockdown which commenced on March 27 to combat the spread of the virus,” the National Treasury said.

South Africa slipped into recession during the final quarter of 2019.

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