Economists weigh in on Moody's affirmation of SA's ratings

They say Moody's announcement shows the country has good prospects of economic growth.

Moody's Ratings agency. Picture: Facebook.

JOHANNESBURG - Economists say Moody's decision to keep South Africa's credit rating at two notches above junk status shows the country has good prospects of economic growth.

The ratings agency has, however, adjusted the outlook from stable to negative.

The investment grade credit rating marks an end to the assessment period that started in March, when Moody's placed the country under review for a possible downgrade.

Economist Thabi Leoka says while Treasury has done well to maintain the country's credit rating, a negative outlook is still a precursor to a downgrade.

"The negative outlook is almost a blemish to the country to say they're not convinced to downgrade us but the next step is down."

LISTEN: What would it mean for SA to reach 'junk' status?

Nedbank's Isaac Matshego says there are some challenges that need to be addressed.

"When it comes to the structural and legislative reforms, government has to ensure that our economy moves to a high growth projected."

The future of the rating is highly dependent on government's success in enhancing medium term growth prospects and stabilising debt.

TREASURY RESPONDS TO MOODY'S

Meanwhile, National Treasury has welcomed Moody's decision to maintain South Africa's credit rating.

It says that the government will bring public finances under control despite recent " adverse political developments".

There have been mounting concerns that the country's government debt will be downgraded to junk this year in the face of sluggish economic growth and political ructions after President Jacob Zuma jolted markets in December by firing Nhlanhla Nene as finance minister.

Zuma replaced Nene with David Van Rooyen and within days was forced to replace him with the Pravin Gordhan, who had previously held the post.

Deputy Finance Minister Mcebisi Jonas subsequently said the wealthy Gupta family, which has close ties to Zuma and his family, had offered him Nene's role.

WATCH: Jonas: The Guptas offered me finance minister job

"The confirmation of South Africa's ratings reflects Moody's view that the country is likely approaching a turning point after several years of falling growth ... and that recent political developments, while disruptive, testify to the underlying strength of South Africa's institutions," Moody's said.

Government says it will continue to work with business and civil society to ensure South Africa remains an investment grade country.

Additional reporting by Reuters.