Fitch spares South Africa from junk

·8 Jun 2016

Fitch Ratings has held South Africa at investment grade, holding the BBB- rating, as many analysts and economists expected.

The group also held the country’s stable outlook, which comes as a surprise, with many expecting an outlook revision to negative.

The ratings agency is the last to make a decision on South Africa’s credit rating for this period, with the focus now moved to the next round at the end of the year.

Like S&P Global, the firm will be looking to see the promised economic reforms take effect to pull the country back from economic decline, with the very real possibility that a downgrade will happen at the end of the year if these fail.

In its announcement, the group highlighted political concerns in the country, questioning government’s commitment to cost-cutting and strong fiscal policies.

“The dismissal of two finance ministers in a week in December, and subsequent tensions between the new finance minister Pravin Gordhan and other parts of the government have raised questions about the commitment of the government to sustained fiscal consolidation and prudent governance of state-owned enterprises.” it said.

Previously the group warned the South African government to steer clear of making populist “quick fix” decisions ahead of the 2016 municipal elections that would put the economy in jeopardy.

Fitch’s rating means South Africa is safe from junk status for the time being, though many economists say the cut is inevitable on the country’s current path.

GDP data from Stats SA on Wednesday painted an even bleaker picture, with the group reporting that South Africa’s economy contracted by 1.2% in the first quarter of the year.