Lifeline for Ramaphosa as SA is set to dodge Moody’s downgrade
South Africa is likely to escape a credit ratings downgrade by Moody’s Investors Service in the next 12 to 18 months.
This is according to Moody’s lead sovereign analyst for South Africa, Lucie Villa.
She was speaking to investors at the ratings agency’s annual sub-Saharan Africa summit in Sandton on Tuesday.
The outlook is stable, so that tells you that a change in the rating is not likely in the next 12 to 18 months.Lucie Villa
She said any upward or downward shift depends on South Africa’s debt ratio trajectory, economic growth, and fiscal deficit.
This gives President Cyril Ramaphosa’s administration more time to implement widely expected economic reforms.
Villa signalled that Moody’s may exercise some level of patience.
We know that policy implementation will be slow. We never expected a revolutionary U-turn but we expect improvement, and if the prospects for improvement were to fade, that is when we would move.Lucie Villa
Moody’s is the only credit ratings agency to keep South Africa above junk status. Its next report is set for 1 November.
A downgrade would mean higher borrowing costs for the government and billions of rand in capital flight.
Villa’s message comes on the back of some positive signs for the country’s economy.
It rebounded by 3.1% in the second quarter of 2019 after contracting by 3.2% in the first quarter.
This followed a stronger than expected performance in the mining sector.
South African Reserve Bank governor Lesetja Kganyago said last week that he expects the economy to grow by about 0.6% this year.
However, this would still be the slowest full-year growth since 2016, signalling that much more needs to be done.
Finance Minister Tito Mboweni recently released a draft economic recovery strategy document and invited public input.