Moody's has changed the outlook on South Africa’s credit ratings to negative from stable.
The decision to change the outlook reflects the ‘material risk that the government will not succeed in arresting the deterioration of its finances through a revival in economic growth and fiscal consolidation measures’, the group said in a statement.
“The challenges the government faces are evident in the continued deterioration in South Africa’s trend in growth and public debt burden, despite ongoing policy responses,” it said.
“While high unemployment, income inequality and the social and political challenges they imply for policymakers are long-standing features in South Africa, the obstacles that they pose to the government’s plans to raise potential growth and contain fiscal deficits are proving more severe than expected a year ago.
The Baa3 rating affirmation takes into account the country’s deep, stable financial sector and robust macroeconomic policy framework, set against ongoing challenges related to weak potential growth and strong fiscal pressures.