By Ndumiso Mlilo
JOHANNESBURG. (News Of The South) – The Japanese based credit rating agency, Ratings and Investment Information, Inc. (R&I) on Thursday downgraded South Africa’s foreign and domestic currency ratings to “BBB+” and “A-” respectively.
The Japanese’s rating agent also downgraded the foreign currency short-term debt rating to “a – 2” and maintained the stable credit outlook. The rating agent cited the slow down in the economic growth since 2012 as the reasons.
In a their statement they said, “On the back of a slowdown in the global economy and a subdued resources boom, South Africa’s economic growth has decelerated since 2012, and its current account deficit has widened. The fiscal deficit is in an acceptable range, and the government’s debt burden is likely to remain at a manageable level.”
They also cited the delayed recovery in economic growth and anticipated strikes and supply side shortages in the economy as some other reasons. Ratings and Investment Information, Inc. (R&I) also noted that the South African government’s debt burden remain sustainable but the rating could come under further pressure should the economic recovery continue to be slower than government’s expectations and fiscal prospects deteriorate further. The rating agent also stated that the country’s economic growth could be affected by the slow or failure to recover in other countries’ economies, industrial actions and infrastructural deficiency.
“A focus is now on effective implementation of the plan, together with the maintenance of prudent macroeconomic policies,” said Ratings and Investment Information, Inc. (R&I).
The South African Treasury issued a statement saying they have noted the downgrading but put a brave face that they are in control. The South African Treasury said, “Government is of the view that the recently tabled Medium Term Budget Policy Statement (MTBPS) by the Minister of Finance comprehensively addresses the major concerns raised by investors in the current economic environment.”
They also stated that measures put in place by the Finance Minister, Nhlanhla Nene this month would steer the country to a sustainable fiscal path. The Treasury also said, “R&I’s announcement must be seen in the context of a challenging economic climate both domestically and internationally. The rating agency’s decision to maintain a stable outlook on the sovereign rating is a sign of confidence in our macroeconomic policy stance. In this regard, continuity of our fiscal and monetary policies over the years has created a climate of predictability and transparency.”
They also said the successful implementation f South Africa economic blue print; the National Development Plan would solve the country’s economic headache.
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