South Africa's political environment appears stable and its institutions transparent. Fiscal and external debt remains moderate, although we expect that infrastructure investment in particular will affect South Africa's external balance sheet over the next few years. Deepening debt markets enhance monetary flexibility. Multiple development needs and social challenges may have long-term ramifications for policy and may raise fiscal expenditure pressures. Supply shortages, including infrastructure bottlenecks, labor market rigidities, and skills shortages, constrain South Africa's growth potential. Financing of current account deficits depends significantly on potentially volatile portfolio flows, exposing the economy to a sudden shift of flows due to changes in global risk appetite, or to rapid market sanctions in the event of policy slippage. Standard&Poor's Ratings Services'
