Economists say the decision by ratings agency Standard and Poor’s to change South Africa’s outlook to negative is a warning to government.
S&P already rates South Africa as non-investment grade or so-called ‘junk’.
Only Moody’s still has the country on an investment grade credit rating.
S&P has also warned of further downgrades if the fiscal situation continues to deteriorate.
National Treasury has noted the S&P warnings and says government remains committed to implementing reforms.
Chief Economist at Econometrix Azar Jammine says S&P is likely to downgrade South Africa further into junk if government does not implement the necessary economic reforms.
“The main reason for this is because the difference between government planned to spend and what it expected to receive in taxes got suddenly much bigger than what we had anticipated partly because of unexpectedly low economic growth, huge bailouts of the SOE’s and the excessive amount being spent on keeping the public servants employed and giving them nice big salary packages.”
“That means that it has had to cut back on other forms of expenditure but basically its own expenditure overall has been far too high.”
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