{"id":448833,"date":"2020-11-16T13:42:44","date_gmt":"2020-11-16T11:42:44","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=448833"},"modified":"2020-11-16T13:42:44","modified_gmt":"2020-11-16T11:42:44","slug":"south-africa-faces-another-downgrade-this-week","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/448833\/south-africa-faces-another-downgrade-this-week\/","title":{"rendered":"South Africa faces another downgrade this week"},"content":{"rendered":"

Credit ratings agencies Moody\u2019s and S&P Global are due to release their rating reviews on Friday (20 November), with recent commentary pointing to the possibility of another downgrade, Nedbank said in a research note on Monday.<\/p>\n

“Among those due this week, Moody\u2019s unfavourable assessment of the Medium-Term Budget Policy Statement points to a high chance of another downgrade,” said Nedbank.<\/p>\n

“Moody’s has said that it anticipates slow economic recovery due to delayed implementation of growth-boosting measures, while it projects the budget deficit to remain above 10% of GDP over 2021 and 2022, with its forecasts 2.5 percentage points wider than the National Treasury’s.<\/p>\n

“Consequently, the debt-to-GDP ratio will breach 100% in 2022 and debt service costs will rise to 6.6% of GDP by 2022 versus the National Treasury\u2019s 5.6%.”<\/p>\n

S&P Global is likely to affirm its BB- rating, but revise its outlook to negative, Nedbank said.<\/p>\n

The third major rating agency, Fitch, has not provided its release dates, although its update is due in late-November to early-December.<\/p>\n

‘Lack of detail’\u00a0<\/strong><\/p>\n

In a review of the 2020 medium-term budget policy statement (MTBPS) presented by finance minister Tito Mboweni at the end of October, Moody’s<\/a> <\/strong>flagged one major overarching concern with the budget: a lack of detail around implementation.<\/p>\n

Although the government\u2019s focus remains on structural reform and fiscal consolidation, this year\u2019s MTBPS, like last year\u2019s, does not outline how and when it will implement policies to boost growth and arrest the deterioration in public finances.<\/p>\n

\u201cAs a result, we expect the economy will remain subdued and for fiscal consolidation to be slow, sustaining the rise in government debt in the next couple of years,\u201d Moody\u2019s said.<\/p>\n

From the emergency budget tabled in June, through the various announcements of economic recovery plans and ways forward for South Africa, ratings firms, analysts, investors and economists have all raised the same questions around implementation.<\/p>\n

\u201cThe MTBPS provides little additional detail on the implementation of structural reforms that would boost economic activity sustainably,\u201d the ratings firm said, noting that the budget presented nothing new.<\/p>\n

\u201cThe government\u2019s fiscal strategy remains broadly unchanged,\u201d it said.<\/p>\n

The problem of government\u2019s moves to cut the wage bill, and the response this will evoke from unions, was similarly flagged by ratings firm Fitch, which noted that the state has a poor track record of getting its way when it comes to wage negotiations.<\/p>\n

\u201cThe current wage agreement from 2018 will expire in April 2021 and it is likely that negotiations for the new agreement will take at least until then.<\/p>\n

\u201cThe track record on negotiating wage agreements in line with budget assumptions is weak, and there is limited room for offsetting measures in other expenditure areas,\u201d it said.<\/p>\n

\n

Read: Why you should put your money in South Africa: Ramaphosa<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Credit ratings agency Moody\u2019s and S&P Global are due to release their rating reviews on Friday (20 November), with recent commentary pointing to the possibility of another downgrade this week, Nedbank said in a research note on Monday.<\/p>\n","protected":false},"author":10,"featured_media":410527,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[26,1512,1799],"class_list":["post-448833","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-headline","tag-moodys","tag-nedbank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/448833","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=448833"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/448833\/revisions"}],"predecessor-version":[{"id":448839,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/448833\/revisions\/448839"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/410527"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=448833"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=448833"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=448833"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}