The impact of spending reprioritization announced in South Africa\u2019s mid-term budget is to unlikely meaningfully boost economic growth, Fitch Ratings Ltd said.<\/p>\n
Finance minister Tito Mboweni plans to redirect R32.4 billion ($2.3 billion) of spending over the next three years to target projects aimed at igniting economic growth, allocating funds to \u201cfaster-spending programs,\u201d incentives for the clothing and textile industries and public-works projects.<\/p>\n
These and other growth-enhancing measures announced in president Cyril Ramaphosa\u2019s stimulus plan last month \u201care also unlikely to significantly alter the growth trajectory,\u201d Fitch said in an emailed statement Thursday.<\/p>\n
Africa\u2019s most-industrialized economy fell into a recession in the second quarter and hasn\u2019t expanded at more than 2% annually since 2013.<\/p>\n
Mboweni\u2019s mid-term budget more than halved the growth forecast for the year to 0.7%, and raised the projections for the budget shortfall and debt.<\/p>\n
While these and the lower revenue projections are \u201cmore realistic\u201d, it doesn\u2019t contain significant offsetting fiscal measures, Fitch said. That pushes the prospect of debt stabilization further into the future, the company said.<\/p>\n
Fitch affirmed its BB+ assessment of South Africa\u2019s debt, with a stable outlook, in June. It cut the rating to sub-investment grade in April 2017.<\/p>\n
\u201cThe rating reflects persistent low-trend growth,\u201d Fitch said on Thursday.<\/p>\n
\u201cThe evolution of fiscal policy in response to the recession and political and social pressures will remain an important part of our sovereign-rating assessment.\u201d<\/p>\n