{"id":125075,"date":"2016-05-30T13:34:35","date_gmt":"2016-05-30T11:34:35","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=125075"},"modified":"2016-05-30T13:34:35","modified_gmt":"2016-05-30T11:34:35","slug":"will-south-africa-be-junk-by-the-end-of-june-heres-what-to-expect","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/125075\/will-south-africa-be-junk-by-the-end-of-june-heres-what-to-expect\/","title":{"rendered":"Will South Africa be junk by the end of June? Here’s what to expect"},"content":{"rendered":"

With ratings agencies Standard & poor’s and Fitch set to give their verdict on South Africa’s credit rating in June, this is what you can expect.<\/p>\n

According to financial group, Nomura, a credit rating cut to junk status is inevitable, but may not happen in June, as the country is not in a “flash” decline into recession, but has rather been on this path for a while.<\/p>\n

“Ratings agencies are not the fastest moving entities, and South\u00a0Africa is not the most dramatic ‘flash bang, fiscal cliff, sudden stop, recession’ story,” said Nomura economist\u00a0Peter Attard Montalto.<\/p>\n

“It is\u00a0a story of the grinding under-performance of an economy held back by uncertainty, lack\u00a0of policy cohesion, lack of key reforms and frequent policy mistakes.”<\/p>\n

As such, the only immediate change the firm sees is that of Fitch joining S&P at having a negative outlook towards the economy, with both keeping the rating at one notch above junk until at least November\/December.<\/p>\n

There are two key sets of\u00a0ratings changes this year: now (and a few weeks back for Moody’s) and after the mid-term budget review\u00a0in November\/December.<\/p>\n

Here is what is expected to happen:<\/p>\n

Standard &\u00a0Poor’s: hold (BBB- with a negative outlook)<\/strong><\/p>\n

According to Nomura,\u00a0S&P already sees South Africa as junk in the back of their minds.<\/p>\n

This is contingent\u00a0on low growth and a lack of reform, especially around expanding contingent liabilities.<\/p>\n

“We do not believe S&P will be shocked to the upside and so we expect it to deliver a\u00a0sub-investment grade rating. The process, however, is evidence based \u2013 the agency\u00a0needs to confirm this view with more growth data and see a lack of reform through a\u00a0longer period this year,” it said.<\/p>\n

Notably, the group believes S&P will hold the line for now, because the rating decision is just a little early vs the Q1\u00a0GDP data which is out later in June –\u00a0so the agency doesn\u2019t have much more real economy\u00a0data than it did in December.<\/p>\n

Despite the expectation the S&P will hold the rating – the accompanying statement is expected to be bleak, contrasting the more optimistic view held by Moody’s.<\/p>\n

Fitch: hold, outlook change to negative (BBB-\u00a0with a negative outlook)<\/strong><\/p>\n

Unlike other the other ratings firms, Fitch is yet to comment on the current political landscape, with the last update pre-“NeneGate” in December.<\/p>\n

Nomura expects this to weigh on its rating review.<\/p>\n

With the politics in the mix, Fitch is expected to downside\u00a0growth risks outweighing short-run fiscal stability, aligning closer with S&P’s negative outlook, than with Moody’s more upbeat approach.<\/p>\n

“An outright cut in the rating is possible but we assign only a moderate probability to one.\u00a0We can see such a move as possible given the political situation and Fitch taking a more\u00a0sceptical view on medium-run reform potential,” Nomura said.<\/p>\n

The graph below shows\u00a0Nomura’s expected\u00a0Ratings outcome.<\/p>\n

\"Credit<\/a><\/p>\n

More on the SA economy<\/h3>\n

Rand on edge as South Africa awaits junk verdict<\/a><\/strong><\/p>\n

The \u2018upside\u2019 to a junked South Africa<\/a><\/strong><\/p>\n

This is how close South Africa came to a recession in 2015<\/a><\/strong><\/p>\n

South Africa GDP grows above expectations<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

With ratings agencies Standard & poor’s and Fitch set to give their verdict on South Africa’s credit rating in June, this is what you can expect.<\/p>\n","protected":false},"author":10,"featured_media":107303,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872,11121],"tags":[26,3186],"class_list":["post-125075","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-finance","tag-headline","tag-junk"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/125075","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=125075"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/125075\/revisions"}],"predecessor-version":[{"id":125083,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/125075\/revisions\/125083"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/107303"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=125075"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=125075"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=125075"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}