South Africa ratings lowered on weakening economic and fiscal trajectory; outlook stable

Ratings:

Foreign Currency: BB/Stable/B
Local Currency: BB+/Stable/B
For further details see ratings list.

Over view

• Weak GDP growth has led to further deterioration of South Africa's public finances beyond our previous expectations.
• We think the government will attempt to introduce offsetting measures in an effort to improve budgetary outcomes, but these may not be strong enough to stabilize public finances, and may weaken economic growth further in the near term.
• We are therefore lowering our long-term foreign currency rating to 'BB' and our long-term local currency rating to 'BB+'.
• The outlook on both the foreign currency and local currency ratings is stable.

Rating Action

On Nov. 24, 2017, S&P Global Ratings lowered its long-term foreign currency sovereign credit rating on the Republic of South Africa to 'BB' from 'BB+' and affirmed the 'B' short-term foreign currency sovereign credit rating. The outlook is stable.

At the same time, the long-term local currency sovereign credit rating was lowered to 'BB+' from 'BBB-' and the short-term local currency sovereign credit rating was lowered to 'B' from 'A-3'. The outlook is stable.

We also lowered the long-term South Africa national scale rating to 'zaAA+' from 'zaAAA' and affirmed the short-term national scale rating at 'zaA-1+'.

The downgrade reflects our opinion of further deterioration of South Africa's economic outlook and its public finances. In our view, economic decisions in recent years have largely focused on the distribution--rather than the growth of--national
income. As a consequence, South Africa's economy has stagnated and external competitiveness has eroded. We expect that offsetting fiscal measures will be proposed in the forthcoming 2018 budget in February next year, but these may be insufficient to stabilize public finances in the near term, contrary to our previous expectations.

The full report can be found here (PDF)