Credit rating agency, Standard and Poor’s, has downgraded its outlook for South Africa’s credit rating to negative.
It says low GDP growth and the growing debt burden are hurting the country’s fiscal metrics.
South Africa is already ranked at sub-investment grade by both S&P and Fitch Ratings – while Moody’s has left it teetering on the edge of junk status.
Earlier this week, Reserve Bank Governor Lesetja Kganyago says the bank considers rating agencies’ reviews because of the risk they have on the premium at which the country can borrow money on local and foreign markets. His comments come after the bank’s Monetary Policy Committee’s decision to leave the repo rate unchanged at six-point-five percent and interest rates also unchanged at ten percent.
“If the rating agencies have a concern, those will begin to factor into the country risk premium. And the manner in which we end up having to decide what the neutral rate is for South Africa is that we take what the foreign neutral is and we adjust it for SA’s country risk. And clearly, if the SA country risk rises then what you have is that that neutral risk is then deemed to be higher.”
