Country Economic Forecasts > East Timor

Rather surprisingly, Moodys opted not to downgrade South Africa this month, after putting its Baa2 rating (two notches above sub-investment grade) under review for a downgrade in March. The rating agency said its decision to keep the rating unchanged reflected the view that South Africa is approaching a turning point after several years of falling growth, although it noted that a downgrade would follow if economic activity fails to revive or if government debt metrics continue to deteriorate. We still expect South Africa to be downgraded to sub-investment grade this year by at least one of the main rating agencies.Our GDP forecasts remain unchanged this month, with growth seen at 0.7% in 2016, 1.5% in 2017 and then 2.5% a year in 2018-19. And the impact of drought will drive up food prices during the remainder of the year, with headline inflation seen averaging 6.8% for 2016 overall. As such, we expect the repo rate to be raised by a further 25bp in both July and November.