Fitch, Moody’s downgrades SA’s sovereign credit rating into further junk status

Global Rating agencies Fitch and Moody’s have both downgraded South Africa’s sovereign credit rating into further junk status. They say a combination of the country’s weakening fiscal position, rising government debt, and the economic impact of COVID-19 are to blame.

In an announcement last night, Fitch said it had lowered the rating of SA’s long-term foreign currency debt to BB negative from BB.

Moody’s changed its assessment to Ba2 from Ba1, with a negative outlook, meaning another downgrade could follow if the economy performs worse or government debt rises faster than expected.

The third major global ratings agency, S&P, decided to keep SA’s sovereign credit rating assessment unchanged.

Fitch and Moody’s downgrades South Africa’s sovereign credit rating into further junk status: 

Recent downgrades

In March, Moody’s downgraded South Africa’s sovereign credit rating to “junk” status.

South Africa’s Finance Ministry, at the time, said the downgrade would add to prevailing financial market stress.

Moody’s said the main driver behind the downgrade was “the continuing deterioration in fiscal strength and structurally very weak growth”.

“The unprecedented deterioration in the global economic outlook caused by the rapid spread of the coronavirus outbreak will exacerbate the South Africa’s economic and fiscal challenges and will complicate the emergence of effective policy responses,” it added.