Washington (awp/afp) – The rating agency S&P signaled on Friday that it might soon raise South Africa’s rating, changing the outlook from stable to positive.
The rating is maintained at BB- for the long-term rating in foreign currencies, and at BB for local currencies.
“The positive outlook reflects our expectation that favorable trading conditions, a path towards contained fiscal spending and the implementation of certain structural reforms might lead to a continued easing of fiscal and external pressures,” S&P said.
The rating might thus be raised “if economic growth were higher than what we currently anticipate, and if we see the continuation of fiscal consolidation, in a context of structural and governance reforms and a continued momentum of support for the external sector”, points out S&P.
On the other hand, the outlook might be reduced to stable “if external or internal shocks derail South Africa’s economic growth (…), or if budgetary financing or external pressures increase significantly”, warns the rating agency.
S&P had lowered South Africa’s rating in April 2020, when the country, already in recession, had also faced Covid-19, with one of the strictest confinements imposed in the world, and which had given a blow to many sectors.
The economy had experienced a record contraction of 6.4% in 2020, then rebounded faster than expected and recorded four consecutive quarters of growth.
But in July, the country had experienced an unprecedented wave of riots and looting, and the economy of Africa’s leading industry had contracted by 1.5% in the third quarter, before starting to grow once more in the fourth quarter (+ 1.2%).
The IMF expects 1.9% growth in 2022.
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