S&P Global Ratings has warned that the Covid-19 epidemic will weigh heavily on South Africa’s GDP growth, and expects the country’s economy to shrink by 4.5% in 2020.<\/p>\n
In April, S&P downgraded South Africa\u2019s credit rating further into non-investment-grade territory, citing the same reason – fallout from the coronavirus.<\/p>\n
South Africa is caught in the grip of a strict lockdown which has been in place for nearly nine weeks, leaving many businesses and individuals without an income.<\/p>\n
\u201cCovid-19 will weigh heavily on GDP growth given the strict domestic lockdown that has shut down much of the economy, the markedly weaker external demand outlook, and tighter credit conditions,\u201d S&P said in a research note on Friday (22 May).<\/p>\n
\u201cAs a result, we now project the economy to shrink by 4.5% this year.\u201d<\/p>\n
Government said it notes S&P\u2019s decision to affirm South Africa\u2019s long term foreign and local currency debt ratings at \u2018BB-\u2019 and \u2018BB\u2019 respectively and maintain a stable outlook.<\/p>\n
The country\u2019s credit ratings by S&P remain non-investment grade.<\/p>\n
It noted S&P’s position that South Africa\u2019s fiscal position remains weak, with a large coronavirus related fiscal package further exacerbating fiscal problems, “which means the country will have to grapple with a large debt burden as a percentage of GDP, and substantial contingent liabilities”.<\/p>\n
“The stable outlook reflects the balance between pressures related to very low GDP growth and high fiscal deficits against the country\u2019s deep financial markets and monetary flexibility,” the government said.<\/p>\n
It said that it has acted decisively to prioritise the health and lives of all South Africans. “It has now adopted a risk-adjusted approach to reopening the economy, with the initial easing of lockdown measures on 1 May 2020, and further easing expected from 1 June 2020.”<\/p>\n
“Furthermore, government\u2019s R500 billion fiscal support package alongside the monetary policy response will provide substantial support to the economy. In June 2020, a special adjustments budget will set out a range of economic reform proposals and measures to stabilise public finances.”<\/p>\n