BUSINESS NEWS - South Africa could move deeper into junk territory as the nation looks set to lose the only stable outlook on its credit ratings this week.
Of the 22 economists in a Bloomberg survey, 16 expect S&P Global Ratings to change its outlook on the country’s credit rating to negative on Friday. That means the next move from the company, which already assesses South Africa’s foreign-currency debt at two levels below investment grade, could be a further downgrade.
This follows after Moody’s Investors Service, which still assesses South Africa as investment grade, changed the outlook on its rating to negative two weeks ago after Finance Minister Tito Mboweni described a rapidly deteriorating fiscal outlook due to billions of dollars in bailouts for cash-strapped power producer Eskom in his medium-term budget statement.
Read: This is what awaits South Africa if Moody’s cuts its rating to junk
S&P warned in its most recent assessment in May that continued fiscal deterioration, structurally weaker economic performance and mounting external financing pressures could prompt it to lower the nation’s credit assessment. It was the first major ratings company to cut South Africa to junk in 2017 after former President Jacob Zuma replaced the finance minister with a little known lawmaker in a late-night cabinet shake-up and currently has a BB reading.
“That’s not the end of the ratings scale,” said Sanisha Packirisamy, an economist at Momentum Investments. “If we continue to see further deterioration in the fiscal metrics and debt continues to track higher and there’s no sign of it stabilising in the medium, it becomes a real threat to ratings.”
