SA falls into another recession as Eskom power cuts bite
On Friday, Fitch announced that it was changing its outlook for South Africa from stable to negative and also kept South Africa's long-term foreign and local currency debt on BB plus. [Picture: Moody's, Facebook]
Economists are now set to monitor ratings agency Moody’s very closely after Fitch announced that it was changing its outlook for South Africa from stable to negative.
On Friday, Fitch also kept South Africa’s long-term foreign and local currency debt on BB plus.
This is in so-called junk status or sub-investment grade.
Fitch said it was concerned about the country’s overall growth potential.
It said that large sums being allocated to Eskom were affecting the country’s debt.
Chief economist at the Efficient Group Dawie Roodt said that Moody’s – the last of the big three ratings agencies – may take note of the pronouncement by Fitch and decide to adjust its rating.
“The real surprise is that Moody’s hasn’t downgraded South Africa yet. I think the reason why the financial markets reacted the way they did, is simply because it underlines the possibility of Moody’s downgrading South Africa.”
Up to now, Moody’s said it had been encouraged by government’s efforts to stabilise the economy and promote growth and there was consensus that it would be devastating for Moody’s to change its mind.Source: EWN
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