Global rating agencies Fitch and Moody’s both downgraded South Africa’s sovereign credit rating further into junk on Friday evening, citing a combination of SA’s weakening fiscal position, rising government debt and the economic shock triggered by the Covid-19 pandemic.
Moody’s has downgraded the country’s credit rating one notch to BA2 and maintained a negative outlook.
Moody’s has highlighted the further expected weakening of South Africa’s fiscal position and indicated that while the strategy to improve things remains in place, implementation risks have risen.
Added to this, Fitch has downgraded South Africa’s credit rating from BB to BB- and with a negative outlook.
It has highlighted high and rising government debt, coupled with weak growth and exceptionally high inequality.
Moody’s and Fitch are both concerned about South Africa’s fiscal position due to the effects of the lockdown.
However, S&P Global has decided to keep its ratings unchanged at BB- for its foreign currency rating and BB for its local currency, both with a stable outlook.
This week, South African Reserve Bank Governor Lesetja Kganyago predicted a growth contraction of 8% for this year.
But the country is expected to claw back some of that lost growth over the next two years.