Downgrade could affect job creation, economic growth - Groepe

The deputy governor of the Reserve Bank says employment opportunities & economic growth could be among the factors taking a knock in the wake of a downgrade.

FILE: A Standard & Poor's document. Picture: AFP

CAPE TOWN - The deputy governor of the Reserve Bank, Francois Groepe, says employment opportunities and South Africa’s economic growth could be among the factors taking a knock in the wake of a downgrade.

Groepe was speaking at the central bank's Monetary Policy Forum in Cape Town on Wednesday night.

S&P Global downgraded the country's foreign denominated debt to sub-investment grade, followed shortly by Fitch who also downgraded the local currency debt to junk status.

The central bank forecasts economic growth of 1.2% for the year.

Groepe says the country’s sub-investment grade rating could translate into a weaker currency.

“A weaker exchange rate is not necessarily negative for economic growth because the stuff that we import becomes more expensive, so people substitute from imports domestically produced products… and because the exchange rate is weaker you may be able to export more.”

He warns the downgrade could scare off investors which will affect job creation.

The bank's growth forecast of 1.2% as well as the expected lower inflation rate for the year, could be revised following the downgrades.

(Edited by Zamangwane Shange)