SA Treasury hails ‘stable’ outlook in Fitch rating

JOHANNESBURG - National Treasury said the latest rating of South Africa from sovereign credit rating agency Fitch signalled a better-than-ex pected performance from the economy as the coun try continued its recovery from the ongoing Covid-19 pandemic.

Fitch’s affirmed South Africa’s long term foreign and local currency debt rat ings at BB-, revising the out look from negative to stable.

Statistics South Africa an nounced in early September that the South African econ omy grew by 1.2 percent in the second quarter of 2021, which was a 19.3 percent in crease from the same period in the previous year, when the country was in a hard national lockdown aimed at curbing the spread of Covid-19.

In its rating Fitch also noted a “surprisingly strong fiscal performance” for the year with improvements in key fiscal indicators follow ing the rebasing of its na tional accounts. A National Treasury statement released on Thursday said while the pandemic continued to serve as a headwind for South Africa, it was unlikely to sink long-term creditworthiness.

“The agency warns that the pandemic continues to weigh on economic perfor mance and remains a source of downside risk for public finances.

“However, the likelihood of severe negative effects on creditworthiness has de clined over the last year de spite the recent emergence of the omicron variant of Covid-19 and the associated rapid surge in new cases in South Africa,” said the statement.

The Treasury statement said government would continue to demonstrate its commitment to fiscal sustainability and “enable long-term growth by nar rowing the budget deficit and sizable debt,” in line with Minister of Finance Enoch Godongwana’s me dium-term budget poli cy statement (MTBPS) in November.

“As stated in the MTBPS, government will use part of the higher tax revenues asso ciated with the recent com modity price surge to narrow the deficit, while increasing non-interest expenditure to support key spending prior ities,” the statement said.

The statement said gov ernment would continue to prioritise faster structural reforms, unlock private sec tor investment and intro duce interventions aimed at driving economic growth and job creation. – FIN24.