SA caught in ‘low growth trap’
● South Africa is stuck in a low growth trap and is at risk of another downgrade if the government doesn’t implement structural reforms, according to Moody’s vice-president Zuzana Brixiova.
Speaking in Johannesburg yesterday, Brixiova said: “Investors have such low confidence that they don’t invest because of the low growth environment.’’
Amid fear of another downgrade, Brixiova said “on balance the risks are tilted to the downside’’.
Brixiova said, however, that South Africa’s outlook would improve if the government implemented policies and reforms that indicated the continued independence and strength of policy institutions; enhanced medium-term growth and stabilised the government’s debt burden.
“There is a gradual erosion of institutional framework.
“Currently, the Reserve Bank is under pressure with questions around its mandate,’’ she said at a Moody’s summit.
Brixiova also outlined low growth and high unemployment, and the accumulation of public debt and contingent liabilities, “which have almost doubled since 2008”.
In June, Moody’s cut South Africa’s local and foreign currency assessments to one level above junk with a negative outlook, citing risks to growth and fiscal strength.