Ratings agency Moody’s follows S&P and confirms review for downgrade
Hours after Standard & Poors announced that it would be downgrading South Africa to “junk status”, ratings agency Moody’s confirmed that it would also be placing the country on review for downgrade.
Moody’s currently has its South African rating at Baa2, a notch higher than S&P prior to its downgrade this afternoon. This means that should it too announce a downgrade rating, it will not necessarily mean junk status for South Africa.
However there is growing concern that Moody’s could could opt for a two notch downgrade noted BusinessDay, meaning that two of the world’s biggest and most respected agencies will have given South Africa junk status.
“The decision to initiate a review for downgrade was prompted by the abrupt change in leadership of key government institutions,” the agency said in a statement on Monday evening.
“On 30 March, the President of South Africa announced wide-ranging changes to the country’s government, changing top leadership in 10 ministries, including in key portfolios such as finance and energy,” it said.
“Changes within a government do not generally signal material changes in a country’s credit profile. Here, however, the timing and scope of the reshuffle raises questions over the signal they send regarding the prospects for ongoing reforms, the underlying strength of South Africa’s institutional framework, and the fragile recovery in the country’s economic and fiscal position.”
That action has raised questions continued Moody’s especially regarding:
- progress on reforms previously identified as essential to sustain South Africa’s fiscal and economic strength, and the effectiveness of South Africa’s policymaking institutions; and
- the more immediate implications for growth and public debt given the potentially negative impact on fragile domestic and external investor confidence.
Moody’s will issue a scheduled announcement on its South african rating on Friday, 7 April.
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