SA caught in ‘low growth trap’

The Times (South Africa) - - Business - — Busi­nessLIVE

● 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.

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