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Moody’s confirms stable outlook for South Africa

Staff Writer
Estimated reading time: 2 minutes

Ratings agency Moody’s has reaffirmed South Africa’s long-term foreign and local currency debt ratings at “Ba2” and maintained a stable outlook for the country.

This decision follows shortly after S&P, another ratings agency, revised South Africa’s outlook from “stable” to “positive,” suggesting that the country may be on a path to a potential ratings upgrade.

“The ratings affirmation highlights that despite nascent improvements, South Africa’s economy is likely to remain subdued,” Moody’s said in its report. It also noted that the energy sector is expected to play an increasing role in driving private sector investments.

Moody’s predicts that South Africa’s economic growth will continue to be slow, with government debt remaining stable and risks balanced.

The agency expects that the new government will likely focus on structural reforms to address growth constraints and continue efforts to consolidate fiscal policy in order to manage spending pressures from social needs, interest payments, and state-owned enterprises.

The South African government has welcomed Moody’s decision to affirm the sovereign’s ratings at ‘Ba2’ and maintain the stable outlook.

Moody’s highlighted South Africa’s credit strengths, which include effective institutions such as the judiciary and central bank, a deep financial sector, and a solid external position.

However, the agency also acknowledged the country’s ongoing challenges, such as inequalities that slow reform progress, social risks, and structural constraints on economic growth, along with a high and expensive debt burden.

“Government welcomes Moody’s acknowledgment that the Government of National Unity (GNU) will pursue structural reforms and ease growth bottlenecks. Government is pursuing policies to achieve rapid, inclusive and sustainable economic growth.”

“Economic reforms are beginning to bear fruit; electricity availability has improved; the logistics system is stabilising, and the cost of doing business is declining in some areas of the economy.”

“Government is also transforming the way it prepares and delivers infrastructure projects. It is mobilising private sector resources that will augment public-sector capability and provide new channels for financing,” the National Treasury said.

As noted in the 2024 Medium-Term Budget Policy Statement (MTBPS), the government’s growth strategy for the medium term will focus on the following pillars: maintaining macroeconomic stability, implementing structural reforms, building state capacity, and supporting growth-enhancing public infrastructure investment.

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