Research Update: South Africa Ratings Lowered To 'BB-' From 'BB' As COVID-19 Further Impairs Fiscal And Growth Prospects; Outlook Stable

COVID-19-related pressures will have significant adverse implications for South Africa's already deficient growth and fiscal outcomes. Its fiscal deficits will remain elevated, and the cost of servicing rising public debt will increase to about 6.5% of GDP by 2023. In addition, contingent liabilities from state-owned enterprises constitute a significant additional risk to the public balance sheet. We have lowered our long-term foreign-currency rating on South Africa to 'BB-' and our long-term local-currency rating to 'BB'. The outlook on both the foreign- and local-currency ratings is stable, as South Africa's credit strengths--particularly a credible and consistent central bank, a flexible actively traded currency, and deep capital markets--should facilitate a gradual, albeit painful, external and fiscal adjustment. On April 29, 2020, S&P

...- COVID-19-related pressures will have significant adverse implications for South Africa's already deficient growth and fiscal outcomes. - Its fiscal deficits will remain elevated, and the cost of servicing rising public debt will increase to about 6.5% of GDP by 2023. - In addition, contingent liabilities from state-owned enterprises constitute a significant additional risk to the public balance sheet. - We have lowered our long-term foreign-currency rating on South Africa to '##-' and our long-term local-currency rating to '##'. - The outlook on both the foreign- and local-currency ratings is stable, as South Africa's credit strengths--particularly a credible and consistent central bank, a flexible actively traded currency, and deep capital markets--should facilitate a gradual, albeit painful, external and fiscal adjustment....

Research Update