CAPE TOWN: After the country’s negative rating by two global rating agencies – Standard and Poor’s (S&P) and Fitch, the South African government says it recognizes the need to steer the country’s economic growth trajectory onto a more robust course.
The rating agencies affirmed South Africa’s long- and short-term foreign currency sovereign credit ratings at BBB- / A-3. The agency also affirmed the local currency ratings at BBB+/ A-2 and maintained a stable outlook on the rating.
National Treasury said that the government recognizes the need to steer South Africa’s economic growth trajectory onto a more robust course. Important structural reforms are underway in major economic sectors that will boost the economy’s growth.
An expectation that the National Treasury will keep to its “hard expenditure ceiling” and thereby contain fiscal deficits and general government debt levels in the medium term.
The 2014 Medium Term Budget Policy Statement (MTBPS) echoes the National Development Plan’s (NDP) agenda to increase private and public sector partnerships, required for more robust economic growth.”
The view that President Jacob Zuma’s second term will continue to ensure political and institutional stability, and broad policy continuity, and that South Africa will maintain fairly strong and transparent institutions, and deep financial markets.
However, S&P said constraints to South Africa’s sovereign credit rating included subdued GDP growth, a relatively high current account deficit, sizeable general government debt and potentially volatile portfolio flows.
The agency said the decision to maintain a stable outlook reflected the view that slight rebounds in GDP growth in the medium term will help contain South Africa’s fiscal and external balances within S&P’s current expectations.
Meanwhile, rating agency Fitch affirmed South Africa’s long-term foreign and local currency Issuer Default Ratings at ‘BBB’ and ‘BBB+’ respectively, and kept the outlook negative.
