S&P Global Ratings has lowered South Africa’s sovereign credit rating further into non-investment grade, or junk, citing the impact of the coronavirus on the country’s already struggling economy. 

On Thursday evening the rating agency announced it had downgraded SA’s long-term foreign-currency credit rating to ‘BB-‘, or the third tier of non-investment grade. The outlook is stable.

In a note, S&P said that SA’s “already contracting economy will face a further sharp Covid-19-related downturn in 2020”. It now expects SA’s economy to shrink by 4.5% this year, which is still more bullish that the 6.1% contraction projected by the SA Reserve Bank. 

The group expects SA’s headline fiscal deficit to widen to 13.3% of GDP in 2020, leading to net debt levels rising to over 75% of GDP by the end of this year. 

“Our anticipation of an only tepid economic recovery means that public financing needs will likely remain elevated throughout the forecast period. As a result, the debt-to-GDP ratio is unlikely to stabilise within this timeframe, rising to 84.7% by 2023, raising questions around debt sustainability.”

National Treasury, in a statement, said it was disappointed by the decision to cut the sovereign rating “at a time when South Africa is facing one of its most challenging times”. 

“Now, more than ever, structural reforms need to be urgently implemented in order to get the economy moving in the right direction,” said Treasury. “Tough decisions have to be made and collaboration between government, business, labour and civil society remains vital in order to contain the spread of Covid-19 and ensure sustainable economic recovery.”

S&P’s latest rating action comes just over a month since Moody’s, a rival rating agency, downgraded SA’s sovereign credit rating to junk, citing a deterioration in SA’s fiscal strength and “structurally very weak growth”.


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