Last year, Moody’s downgraded the country’s debt to “junk” status with a negative outlook, citing the country’s ballooning debt servicing costs and a high civil servants wage bill as some of reasons behind the downgrade.
Moody’s has, so far, not given any indications as to when an announcement can be expected.
Last year, the global Rating agencies Fitch and Moody’s have both downgraded South Africa’s sovereign credit rating into further junk status. They stated that a combination of the country’s weakening fiscal position, rising government debt, and the economic impact of COVID-19 are responsible for the downgrading.
Fitch said it had lowered the rating of SA’s long-term foreign currency debt to BB negative from BB.
Moody’s changed its calculation to Ba2 from Ba1, with a negative outlook, indicating another downgrade could follow, if the economy performs worse or government debt rises faster than expected.
However, the third major global ratings agency, S&P, decided to keep SA’s sovereign credit rating assessment unchanged.
South Africa’s Finance Ministry, at the time, said the downgrade would include current financial market stress.
Moody’s said the main driver behind the downgrade was “the continuing deterioration in fiscal strength and structurally very weak growth”.
“The unprecedented deterioration in the global economic outlook caused by the rapid spread of the coronavirus outbreak will exacerbate the South Africa’s economic and fiscal challenges and will complicate the emergence of effective policy responses,” it said.
Chief Economist at Efficient Group Dawie Roodt says the move is not unusual.
“We have to remember that rating agencies are private organisations they postpone their announcements or they change ratings, and they can do it whenever or whatever they want to do because they are private organisations, and a postponement like this is nothing unusual.”
He said: “I don’t think we should read anything into this. But as far as South Africa’s rating are concerned, I think our rating current levels will remain unchanged and I think for a couple of months. But I’m afraid if we do not fix especially the state’s finances, further downgrades can be expected but for now I think things are going to remain unchanged at least for a couple of months.”
