South Africa Economy Outlook Downgraded

29 March 2012 13:00 - Victoria Wedderburn

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South Africa Economy Outlook Downgraded

Standard & Poor’s Rating Services have lowered South Africa’ outlook to negative from stable because of slower economic growth and a risk the government may be unable to control spending to rein in the fiscal deficit. In a statement S&P said “The negative outlook reflects the potential for a downgrade if economics and social problems feed into the political debate in the run-up to the 2014 national and provincial elections and consequently further put pressure on the policy framework.” They agency also said that, “Fundamental structural economic and social problems, such as lower capita growth estimated at 2.1% in 2012 and very high unemployment rates, persist, and South Africa’s structural current account deficit makes the economy dependent on external financing.”

The rating firm affirmed the country’s foreign currency rating of BBB+ and this rating is in line with Thailand, Ireland and Kazakhstan. This is the third outlook downgrade in four months for South Africa, after Fitch and Moody’s cut their outlooks. The Treasury have rejected the ratings assessment saying that the ratings agency has mistaken “political debate and a vigorous exchange of ideas on policy” for political risk. They said that the South African economy had continued to demonstrate resilience.

The rating firm said that South Africa’s political climate appears more stable after the ruling African Nation Congress’ (ANC) expelled the leader of its youth league, Julius Malema.  S&P said that recent ANC policy proposals herald no disconcerting shifts in political goals for the country.

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Related Links:
• Standard & Poor's
Ratings
• National Treasury
South Africa
• African National Congress
South Africa's national liberation movement
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