SA faces further downgrade

INTERNATIONAL ratings agency Moody’s has warned that South Africa could face further downgrades as Finance Minister Malusi Gigaba’s Medium-Term Budget Policy Statement (MTBPS) last week indicated a move away from the fiscal consolidation path of the past few years.

Moody’s lead sovereign analyst for Africa, Zuzana Brixiova, said yesterday the absence of measures to contain the fiscal deficit and reducing mandatory recurrent spending showed the country had abandoned fiscal consolidation and damaged an already feeble business confidence and growth.

Brixiova said the MTBPS was the first fiscal policy document in the past several years that lacked fiscal consolidation. “In our view, unless the government presents a credible fiscal consolidation plan in the February 2018 Budget, debt sustainability is at risk,” Brixiova said. Moody’s credit assessment is expected soon.

Gigaba revised the country’s growth forecast down to 0.7 percent from 1.3 percent announced in February with a shortfall of 4.3 percent of GDP in fiscal 2017/18 financial year – the highest level since the 2009 financial crisis.

The reviews are in line with the IMF and World Bank predictions.

Moody’s downgraded South Africa’s sovereign credit rating in June, listing “reduced growth prospects” as one of the three key drivers of the review.