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· Ratings agencies Fitch and Moody’s downgraded South Africa’s financial strength yesterday, saying the COVID-19 pandemic had further stifled the heavily indebted country’s economy
· Earlier, both the agencies, downgraded their ratings one notch, to “BB-” at Fitch and “Ba2” at Moody’s, and warned that they could lower them again in the medium term
Ratings agencies Fitch and Moody’s downgraded South Africa’s financial strength yesterday, saying the COVID-19 pandemic had further stifled the heavily indebted country’s economy. Earlier, both the agencies, downgraded their ratings one notch, to “BB-” at Fitch and “Ba2” at Moody’s, and warned that they could lower them again in the medium term.
Fitch said that South Africa’s high and rising government debt, exacerbated by the economic shock triggered by the COVID-19 pandemic has led to downgrade. The very low trend growth and exceptionally high inequality would continue to complicate fiscal consolidation efforts. Moody’s noted that the country’s finances were already crumbling before the pandemic arrived, and the downgrade “reflects Moody’s assessment of the impact of the pandemic shock, both directly on the debt burden and indirectly by intensifying the country’s economic challenges and the social obstacles to reforms.
S&P Global kept its outlook stable. S&P said that indications are the economy began to rebound from third-quarter 2020. It might return to positive annual growth alongside slow fiscal consolidation in 2021-2023.
According to Stats SA, the GDP declined 51 percent on an annualized basis in the second quarter of 2020. The agency said last week more than 30-percent of the country are unemployed, its highest level since 2008. The government forecasts GDP to shrink by 7.2-percent this year overall.
