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Moody’s set to announce decision on downgrade

Moody’s currently rates the country two notches above sub-investment grade at BAA2 with a negative outlook.

FILE: A sign for Moody's rating agency stands in front of the company headquarters in New York in 2012. Picture: AFP/Emmanuel Dunand.

JOHANNESBURG – Ratings agency Moody’s is set to announce today whether it will downgrade the country or whether it’s been convinced that South Africa is on track towards better economic growth.

Moody’s currently rates the country two notches above sub-investment grade at BAA2 with a negative outlook.

However, it’s cited a number of factors that could affect this.

In September, Moody’s warned that it could downgrade the country if there was no significant growth.

At one point Reserve Bank Governor Lesetja Kganyago stated that zero percent growth was expected but the situation has now improved.

Announcing on Thursday the repo rate was remaining unchanged, Kganyago said the bank expected better growth.

“The bank forecast remains unchanged at 0.4% for 2016 and 1.2% and 1.6% for the next two years.”

Kganyago says the economy has weathered the storm and a stronger rand has also countered inflation.

Standard & Poor’s Global and Fitch are expected to announce their ratings decisions next Friday.

Meanwhile, the prime lending rate, which is the figure charged by banks to customers, will remain at 10.5%.

Kganyago says the Monetary Policy Committee (MPC) has unanimously decided to keep rates unchanged at 7%.

“Domestic demand pressures remain weak and consumers are expected to remain under pressure for some time. The MPC has accordingly decided to keep the repo rate unchanged at 7% per annum. The decision was unanimous.”

There were concerns that the rate would increase with October’s inflation figure measured at 6.4%. However, the governor says inflation is expected to return to within the target range despite pressures from food prices.

“Since the previous meeting of the MPC, inflation forecasts have remained largely unchanged. Whereas the risks for the inflation forecast were previously assessed to be more or less balanced. The committee now assesses the risks to be moderately on the up side.”

The central bank has left rates unchanged at 7% since March this year.

(Edited by Leeto M Khoza)