Moody\u2019s Investors Service upgraded its outlook on South Africa\u2019s credit rating as high commodity prices support the government\u2019s efforts to rein in debt and reduce budget deficits.<\/p>\n
The company kept the nation\u2019s foreign- and local-currency ratings at Ba2, two levels below investment grade, and changed the outlook to stable from negative. The move reflects improved fiscal outlook that raises the likelihood of the government\u2019s debt burden stabilising over the medium term, Moody\u2019s said in a statement Friday.<\/p>\n
\u201cSouth Africa\u2019s fiscal position has markedly recovered from the pandemic thanks to government\u2019s fiscal consolidation measures and positive external developments,\u201d Moody\u2019s said. \u201cAs a result, it now looks likely that the government\u2019s debt-to-GDP ratio will stabilise around 80% over the medium term.\u201d<\/p>\n
The stable outlook signals that the downward trend in Moody\u2019s rating of South Africa, which began a decade ago, may be reaching a turning point. The company was the last major firm to take its assessment of the country\u2019s debt to junk, with two downgrades in 2020. Its assessment of South Africa\u2019s debt is still a level higher than those of S&P Global Ratings and Fitch Ratings.<\/p>\n
The outlook change follows a\u00a0budget\u00a0buoyed by windfall mining revenue and forecasts showing government debt will now peak 75.1% of GDP in the 2025 fiscal year — a lower level and a year earlier than previously expected — and a consolidated budget deficit that will narrow faster than previously anticipated. Robust demand and high commodity prices saw an improvement in mining-company profits in South Africa, the world\u2019s biggest platinum producer.<\/p>\n
Still, spending pressures including continued support for cash-strapped state-owned companies, a high public-sector wage bill and growing social welfare needs present risks to the stabilizing debt trajectory.<\/p>\n
Moody\u2019s expects that the government will continue to pursue its fiscal consolidation strategy.<\/p>\n
The government notes and welcomes Moody\u2019s decision to affirm South Africa\u2019s long term foreign and local currency debt ratings, National Treasury said in an emailed statement.<\/p>\n
\u201cFaster implementation of economic and SOC reforms, accompanied by fiscal consolidation to provide a stable foundation for growth, will ease investor concerns, and support a faster recovery and higher levels of economic growth,\u201d it said.<\/p>\n