SA remains vulnerable to credit ratings downgrade amid poor economic growth, govt debt - Fitch

JOHANNESBURG - International ratings agency Fitch said South Africa remains vulnerable to a credit ratings downgrade as poor economic growth and government debt continue to bite.

Fitch released the country’s latest credit report on Friday. 

While it kept the credit rating unchanged at BB- with a stable outlook, Fitch said South Africa’s macroeconomic environment is on shaky ground.

The ratings agency said the country’s long-term foreign currency rating is constrained by low gross domestic product (GDP) growth, a high level of inequality, and ballooning government debt.

Government debt is forecast to surpass 80% of GDP by 2025, up from the current estimated 76%. 

Fitch warned that a further significant increase in government debt could lead to a credit rating downgrade.

The ratings agency said growth is being hampered by power shortages and a struggling logistics sector. 

A further weakening of growth or a sustained shock that further undermines fiscal consolidation could also push the country’s rating over the edge.

Despite the structural issues, Fitch said the country’s strong institutions and a credible monetary policy framework are working in favour of South Africa. 

Following the release of the latest credit report, National Treasury reaffirmed plans to raise GDP growth and to stabilise debt, which could put the country on a path to a positive rating.