Fitch Ratings signalled that it might upgrade South Africa\u2019s credit outlook if the government follows the path to debt stabilisation outlined in its three-year budget plan.<\/p>\n\n\n\n
\u201cIt could be positive for the sovereign\u2019s rating if debt does follow the path projected by the government,\u201d Fitch said in a statement on Monday (4 November), while cautioning that the budget forecasts are optimistic.<\/p>\n\n\n\n
Last week, the National Treasury projected that state debt would peak at 75.5% of gross domestic product in the year through March 2026, which is slightly higher than its February projection. <\/p>\n\n\n\n
In contrast, Fitch expects the debt-to-GDP ratio to rise in the next few years, reaching 76.9% in the 12 months through March 2027.<\/p>\n\n\n\n
\u201cOur debt forecast is higher than that of the government,\u201d partly because it incorporates assumptions of transfers to struggling state-owned logistics company Transnet, the rating company said.<\/p>\n\n\n\n
Fitch also said it may revise the nation\u2019s credit outlook if the government\u2019s efforts to rein in debt improve as a result of Africa\u2019s largest economy performing better than anticipated.<\/p>\n\n\n\n
\u201cIf we become more confident that South Africa\u2019s medium-term growth outlook will improve sufficiently to reduce challenges associated with fiscal consolidation, this could also be positive for the rating,\u201d it said.<\/p>\n\n\n\n
The Treasury revised its average growth forecasts in the budget update upwards to 1.8% over the next three years, from 1.6% projected in February, because of a more stable energy supply and an anticipated increase in infrastructure investment. <\/p>\n\n\n\n
GDP has expanded by an average of less than 1% over the past decade.<\/p>\n\n\n\n
Fitch affirmed South Africa at three levels below investment grade with a stable outlook in September.<\/p>\n\n\n\n