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The SA Daily 12 October 2018

Moody's seen stable

  • Moody’s will likely review SA’s sovereign credit rating today; it might be delayed if the agency elects to wait until after the Medium Term Budget Policy Statement (MTBPS) on 24 October. However, we expect a review today, and no change either to outlook or rating.
  • At its H1:18 rating review, Moody’s kept SA’s credit rating at investment grade (Baa3) with a stable outlook, but saying that should government's commitment and/or ability to revive economic growth and stabilise debt falter, it would be a rating-negative. Since then, Moody’s has lowered SA’s 2018-2019 growth forecasts, and widened its budget deficit forecast. It now expects less than 1% growth for SA in 2018, and a budget deficit around 0.4% of GDP wider in FY18/19 than government’s Budget 2018 forecast. However, it still sees the medium-term deficit targets as achievable, which it says should see government debt stabilise.
  • At its recent annual conference in SA, Moody’s was reasonably neutral about developments since the previous rating action. It stressed the importance of some of the characteristics of SA’s external and government debt cushioning the impact of reduced global liquidity and rand weakness. It also acknowledged SA now facing more of a challenge to improve growth and fiscal metrics but said that “the political commitment is still there”.
  • Overall, Moody’s SA view is still measured; we therefore do not foresee a rating downgrade today (see our report Multiple headwinds of 08 October, by Elna Moolman).

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