Don’t put populist “quick fixes” before the economy: Fitch warns SA
Ratings agency Fitch has warned the South African government against making populist “quick fix” decisions ahead of the 2016 elections which could put the economy at risk.
Fitch Managing Director Ed Parker was quoted by Reuters saying that the government may be tempted to “react to the discontent about insufficient improvement to living standards by pushing costly social programmes” ahead of the elections.
“Authorities may feel, if they have a poor showing, that there is a need for quick fixes like the introduction of a high minimum wage that would appear to help the poor but may also discourage investment,” he said
Fitch, along with fellow rating group Standard & Poor’s, currently has South Africa rated at one notch above junk status – though the former has a stable outlook, while S&P is at negative.
Both firms have been in communication with the South African government about the economic conditions in the country – which are bleak – and are expected to make assessments in the coming months.
South Africa is swamped with a myriad of issues, getting battered between external, global problems, as well as internal conflicts and policy issues.
The country’s economic growth is expected to be as low as 0.6% in 2016.
A junk rating would further compound South Africa’s woes, increasing the cost to borrow funds, with many investors and hedge funds being prohibited by policy from investing in the country.
More on the economy
SA junk status: “Expect the worst”
Junk status for South Africa? It’s not looking good
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