Rating agency Fitch has affirmed South Africa’s rating at sub-investment grade with a stable outlook, pointing to better-than-expected fiscal revenues and the government’s efforts to rein in spending as the reasons.
The agency said if these measures are successfully continued, they could bring about debt stabilisation.
“The affirmation and Stable Outlook take into account substantial recent over-performance on fiscal revenues and the government’s strong efforts to control expenditure, which if successfully continued, could bring about debt stabilisation,” it said.
“However, at this stage we assume a substantial part of recent higher revenues to be temporary and see current public sector wage negotiations pointing to increased upward pressure on spending.”
However, Fitch also warned that the high government debt, low trend growth and high inequality that will continue to complicate fiscal consolidation.
The agency also said it expects GDP growth to slow from 1.6% in 2022 to 1.1% in 2023, on the back of weakening global growth and monetary tightening and fading support from post-pandemic re-opening, with only a mild recovery to 1.7% in 2024.
“Our forecasts assume that power shortages, which according to the South African Reserve Bank estimates held back growth this year by 1pp, will not significantly improve next year and will ease only gradually in 2024. While substantial investments in increasing generation capacity are under way, there is a risk that the power supply imbalances deteriorate further with escalating effects on growth,” it said.
For more business news from Sunday World, click here.
Follow @SundayWorldZA on Twitter and @sundayworldza on Instagram, or like our Facebook Page, Sunday World, by clicking here for the latest breaking news in South Africa. To Subscribe to Sunday World, click here
