Ratings agency Moody’s has cut its 2020 growth forecast for South Africa to 0.7 % from a September forecast of 1.5%. According to Moody’s, the economy remains stuck in low gear due to lacklustre domestic private-sector demand.
In a research report, Moody’s also attributed the scaled-down forecast to the detrimental impact of the continued load shedding on the country’s manufacturing and mining activity.
The rating agency left South Africa on the verge of “junk” status last year after it revised the outlook on the country’s last investment-grade credit rating to negative. It is scheduled to review that rating next month.
Meanwhile, in November last year, Moody’s changed its outlook on South Africa’s credit ratings from stable to negative. The BAA 3 rating is the lowest category in the investment-grade stable.
Watch analysis of the decision on the video below:
In November, Moody’s gave National Treasury until the February budget to implement the necessary reforms to lift the economy out of the slump.
It cited a lack of faith in governments’ ability to implement its intended economic reforms.
A downgrade would complicate government’s already tricky task to balance the budget and it will most likely raise borrowing costs.
Finance Minister Tito Mboweni will deliver his Budget Speech next week in Parliament.