File photo: REUTERS
File photo: REUTERS

Credit rating agency Fitch Ratings expects SA’s growth to improve slightly on the back of favourable investor and business sentiment but warned that it was still too low.

Fitch senior director of sovereigns Jan Friederich said in a statement on Monday that gross domestic product growth was expected to rise to 1.6% in 2018 and 2 % in 2019, but warned that this would still be lower than the "BB" rating category median.

Fitch affirmed SA’s BB+ rating with a Stable Outlook in November 2017.

The budget speech will be an important indicator of the direction of fiscal policy under President Cyril Ramaphosa.

"The new president has spoken in favour of fiscal discipline, but the main guidelines for the budget and much of the detailed work will likely have been prepared under Zuma."

"Ramaphosa has promised a number of initiatives to increase employment and strengthen growth, including a resolution of the stand-off between the government and the mining companies over a new mining charter, which could help rekindle investment in the sector," said Friederich.

"However, the impact of the measures on overall growth is likely to be relatively modest and passing more substantial reforms could remain challenging."

Friederich added that former president Jacob Zuma’s resignation last week reduced SA’s policy paralysis risk.

"Zuma’s successor, Cyril Ramaphosa, will bring a greater focus to improving governance and strengthening economic and fiscal policy, which is likely to contribute to a recovery in business confidence and growth."

"Whether this will be sufficient to lead to a significant improvement in the government debt trajectory and trend growth is uncertain."

While "policy paralysis" would have remained should Zuma have served his full term in office, Friederich warned that divisions within the party remain that could impact policy making.

This comes after favourable statements from S&P and Moody’s following Ramaphosa’s election.

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