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<\/a><\/p>\nS&P is also unlikely to change its assessment in a review scheduled for the same day. South Africa is similarly expected to avoid another downgrade from Fitch, which also has a negative outlook on its rating, according to 94% of survey respondents.<\/p>\n
While South Africa\u2019s finances remain shaky, finance minister Enoch Godongwana\u2019s commitment last week to rein in debt, reduce loan-servicing costs, narrow the budget deficit and cut spending in the coming year should help bolster investor confidence.<\/p>\n
The medium-term budget was the clearest sign yet that the former labour unionist and head of economic transformation of the ruling African National Congress won\u2019t give in to calls to scale back austerity measures.<\/p>\n
What Bloomberg Economics Says…<\/strong><\/p>\n \u201cWe don\u2019t see another downgrade barring any major shocks. But the bar for upgrading is really high. It is possible for the Treasury to meet it by the end of the decade if it sticks to the consolidation plan outlined in the budget, but risks abound.\u201d<\/p>\n The budget showed a tighter path to a primary surplus, where revenue is higher than non-interest spending, and a faster narrowing of the fiscal deficit. That\u2019s partly due to significantly higher tax collections from\u00a0mining companies\u00a0reaping the benefits of elevated commodity prices and the state\u2019s decision to use some of the money to pay down debt.<\/p>\n A statistics review that showed Africa\u2019s most-industrialized economy is 11% bigger than previously estimated means debt is now forecast to peak at 78.1% of GDP – almost 10 percentage points lower than the government estimated in February – in the 2026 fiscal year.<\/p>\n Debt-service costs – the fastest-growing expenditure line item since 2011 – will continue to rise, peaking at 5.3% of GDP in the same year.<\/p>\n Ratings companies are likely to \u201cshare general investor concern that debt stabilization will remain challenging until trend growth is credibly and sustainably higher, particularly given elevated demands for poverty relief,\u201d said Elna Moolman, a South Africa economist at Standard Bank.<\/p>\n South Africa\u2019s economy is stuck in its longest downward cycle since World War II and has grown by less than 3% annually since 2012.<\/p>\n While output is expected to return to pre-coronavirus pandemic levels by late next year, that\u2019s unlikely to be enough to create sufficient jobs in a country where more than a third of the workforce is unemployed and tackle poverty in one of the world\u2019s most unequal societies.<\/p>\n\n