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Moody’s Investor Relations has published a credit opinion report on South Africa, although will look to next week’s (24 October) Medium-Term Budget Speech (MTBS) before releasing its next ratings review on the country. The ratings agency is the last amongst its major ratings agency peers (Standards & Poor’s and Fitch’s) to still have South Africa’s local currency debt at investment grade (albeit only one notch above sub-investment grade or “junk”).
Some of the key points from Moody’s credit opinion report are as follows:
- Economic growth for South Africa revised (lower) to 0.5% in 2018 and 1.3% in 2019
- Government needs to stimulate growth through policy and investment
- State Owned Enterprises need to be stabilized to reduce the “contingent liability” to a debt burdened government
- Reforms which address SOE’s could be positive to ratings
- Failure to address SOE debt and Government liabilities could be negative for ratings
- Government could reduce the deficit from 4.3% of GDP to 3.5% of GDP by 2020/21
- Debt should be maintained below 60% of GDP
The rand – Technical View