South Africa’s Credit Rating Affirmed by Standard and Poor’s
Standard & Poor’s (S $ P) affirmed South Africa’s credit rating on Friday, saying tax increases should limit fiscal risks in the next three years stating the following.
Firstly, real GDP growth in South Africa is expected to be limited to 2.1% in 2015, owing to electricity supply shortages among other factors, but we think there will be a slight acceleration to an average of 2.7% per year over 2016-2018 thanks to an increase in electricity generating capacity, domestic consumption, and rising net exports.
Secondly, tax increases, alongside the recent wage settlement for public sector workers, should help limit fiscal risks in 2015-2018, and the rating agency expect the treasury to stick to its pledged hard expenditure ceiling.
However, GDP growth remains low, current account deficits still remain relatively high, general government debt sizable, and portfolio flows potentially volatile.
“We are affirming our long- and short-term foreign currency sovereign credit ratings on South Africa at ‘BBB-/A-3’”, the agency said.
According to S $ P, the stable outlook reflects its view that a slight improvement in GDP growth in 2015-2018 and ongoing fiscal prudence will help contain South Africa’s fiscal and external balances within its expectations.
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