Moody’s Investor Services is scheduled to release its credit rating review for South Africa, the first of three rating decisions expected in the coming weeks, says Nedbank.
S&P Global Ratings is scheduled to publish its ratings review on 20 May, while Fitch Ratings is expected to publish its review around the same time, the bank said in a research note on Friday.
The agencies assess several factors that currently point to the current ratings being maintained, the bank said.
“The National Treasury continues to demonstrate its commitment to stabilise public finances, which deteriorated dramatically over the past decade. However, much of its success will depend on the growth trajectory and the government’s ability to exercise expenditure restraint.
“The government will need to limit growth in non-investment, albeit critical functions, while accelerating and improving the efficiency of spending on investment projects. This, coupled with more policies to unlock the growth bottlenecks in the network industries, will boost the growth rate and the economy’s capacity to create jobs.â€
Nedbank added that the government has little room to manoeuvre on debt service costs, and the pace of fiscal consolidation will depend on containing the public sector wage bill and boosting economic growth.
“The revised fiscal ratios will help avoid further credit rating downgrades instead of improving the chances of an upgrade in the foreseeable future. Even with the lower figures, South Africa’s ratios remain well above the medians of BB-rated sovereigns.
“As such, we expect Moody’s and Fitch Ratings to affirm their credit ratings and maintain a stable outlook, and S&P Global Ratings to affirm its rating but revise the outlook to stable from negative.â€-BT
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