The ratings on South Africa are supported by its prudent macroeconomic policies, a moderate debt burden, and stable political institutions. These are balanced by continued high reliance on external portfolio inflows in the context of a large current account deficit, and severe structural socioeconomic weaknesses. In particular, pressures on South Africa's balance of payments increase the risk of further currency depreciation and a sharper-than-anticipated correction in the current account deficit, with attendant effects on prospects for trend growth and fiscal outturns. The global financial turmoil has contributed to a sharp depreciation of the South African rand since the beginning of 2008. We expect net portfolio flows to remain negative on average in the short term. Combined with a current account
