Rating agency S&P Global Ratings cut South Africa’s credit ratings further into junk status last night but revised its outlook from negative to stable.
The rating agency flagged the extreme pressure South Africa’s finances and economic growth will come under due to COVID-19 as one of the reasons for its rating action.
The rating agency also expects South Africa’s budget deficit will balloon to 13.3% of gross domestic product (GDP) this year.
S&P further said South Africa’s GDP will contract by 4.5% this year – better than the 6.1% plunge forecast by the South African Reserve Bank.
National Treasury in a statement, said all hands were on deck to prioritise measures announced by President Cyril Ramaphosa aimed at arresting the spread of the deadly virus which has already claimed more than 100 lives in the country.
“Government is disappointed by S&P’s decision to downgrade the sovereign rating at a time when South Africa is facing one of its most challenging times,” the department said.
“Government welcomes, however, the revision of the outlook to stable from negative, and considers this an indication that the agency at least recognizes some of government’s fiscal and monetary policy measures as strong points.”
S&P’s decision comes weeks after Fitch Ratings downgraded South Africa’s ratings deeper into junk as a result of the lack of “a clear path towards government debt stabilization” as well as the expected impact of the COVID-19 shock on public finances and growth.
Fitch’s move was preceded by Moody’s decision to downgrade the country’s sovereign rating in March.
